Health
Policy for
Low-Income
People in
Colorado
Marilyn Moon
Len Nichols
Stephen Norton
Barbara A. Ormond
Susan Wallin
Jean Hanson
Laurie Pounder
The Urban Institute
State Reports
Assessing
the New
Federalism
An Urban Institute
Program to Assess
Changing Social Policies
Health
Policy for
Low-Income
People in
Colorado
Marilyn Moon
Len Nichols
Stephen Norton
Barbara A. Ormond
Susan Wallin
Jean Hanson
Laurie Pounder
The Urban Institute
State Reports
Assessing
the New
Federalism
An Urban Institute
Program to Assess
Changing Social Policies
The Urban
Institute
2100 M Street, N.W.
Washington, D.C. 20037
Phone: 202.833.7200
Fax: 202.429.0687
E-Mail: [email protected]
http://www.urban.org
Copyright 䉷 July 1998. The Urban Institute. All rights reserved. Except for short quotes, no part of this book may be
reproduced or utilized in any form by any means, electronic or mechanical, including photocopying, recording, or
by information storage or retrieval system, without written permission from The Urban Institute.
This report is part of The Urban Institute’s Assessing the New Federalism project, a multi-year effort to monitor and
assess the devolution of social programs from the federal to the state and local levels. Alan Weil is the project director and Anna Kondratas is deputy director. The project analyzes changes in income support, social services, and
health programs. In collaboration with Child Trends, Inc., the project studies child and family well-being.
The project has received funding from the Annie E. Casey Foundation, the Henry J. Kaiser Family Foundation, the
W.K. Kellogg Foundation, the John D. and Catherine T. MacArthur Foundation, the Charles Stewart Mott Foundation,
the Commonwealth Fund, the Stuart Foundation, the Robert Wood Johnson Foundation, the Weingart Foundation, the
McKnight Foundation, and the Fund for New Jersey. Additional funding is provided by the Joyce Foundation and
the Lynde and Harry Bradley Foundation through a subcontract with the University of Wisconsin at Madison.
The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to The Urban Institute, its trustees,
or its funders.
The authors thank the many state and local officials and others who participated in interviews and provided
information.
About the Series
A
ssessing the New Federalism is a multi-year Urban Institute project
designed to analyze the devolution of responsibility from the federal
government to the states for health care, income security, employment and training programs, and social services. Researchers monitor
program changes and fiscal developments. In collaboration with Child Trends,
Inc., the project studies changes in family well-being. The project aims to provide timely nonpartisan information to inform public debate and to help state
and local decisionmakers carry out their new responsibilities more effectively.
Key components of the project include a household survey, studies of policies in 13 states, and a database with information on all states and the District
of Columbia, available at the Urban Institute’s Web site. This paper is one in a
series of reports on the case studies conducted in the 13 states, home to half of
the nation’s population. The 13 states are Alabama, California, Colorado,
Florida, Massachusetts, Michigan, Minnesota, Mississippi, New Jersey, New
York, Texas, Washington, and Wisconsin. Two case studies were conducted in
each state, one focusing on income support and social services, including
employment and training programs, and the other on health programs. These 26
reports describe the policies and programs in place in the base year of this
project, 1996. A second set of case studies to be prepared in 1998 or 1999 will
describe how states reshape programs and policies in response to increased
freedom to design social welfare and health programs to fit the needs of their
low-income populations.
The income support and social services studies look at three broad areas.
Basic income support for low-income families, which includes cash and nearcash programs such as Aid to Families with Dependent Children and Food
Stamps, is one. The second area includes programs designed to lessen the
dependence of families on government-funded income support, such as education and training programs, child care, and child support enforcement. Finally,
the reports describe what might be called the last-resort safety net, which
includes child welfare, homeless programs, and other emergency services.
The health reports describe the entire context of health care provision for
the low-income population. They cover Medicaid and similar programs, state
policies regarding insurance, and the role of public hospitals and public health
programs.
In a study of the effects of shifting responsibilities from the federal to state
governments, one must start with an understanding of where states stand.
States have made highly varied decisions about how to structure their
programs. In addition, each state is working within its own context of privatesector choices and political attitudes toward the role of government. Future
components of Assessing the New Federalism will include studies of the variation in policy choices made by different states.
iv
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
Contents
Highlights of the Report 1
Thumbnail Sketch of the State 5
Sociodemographic Characteristics 5
Economic Status 5
Political and Budgetary Landscapes 7
Setting the Policy Context 9
Overview of the State’s Health Agenda 9
State Health Care Indicators 10
Health Care Spending and Coverage 10
State Health Programs 11
Medicaid 12
Department of Public Health and Environment 16
Mental Health and Developmental Disabilities 16
Assessing the New Federalism: Potential State Responses to Additional
Flexibility and Reduced Funding 19
Providing Third-Party Health Coverage for the Low-Income Population
Medicaid Eligibility 21
Other Public Financing Programs 24
Insurance Reforms 27
21
Financing and Delivery System 29
Changes in the Health Care Market and Their Impact on
Access for Low-Income Populations 29
The Colorado Health Care Market 30
Adequacy of Medicaid Hospital and Physician Reimbursement and
Disproportionate Share Hospital Payments 32
Medicaid Managed Care 34
HMO Contracting Issues 36
Managed Care for the Mentally Ill and Elderly Populations
38
Delivering Health Care to the Uninsured and Low-Income Populations
The Role of the Public Health System 39
Impact of Government Policies and Market Changes on
Safety Net Providers in Denver 40
Long-Term Care for the Elderly and Persons with Disabilities
Background 43
Long-Term Care for the Elderly 46
Long-Term Care for Persons with Mental Illness and
Developmental Disabilities 48
39
43
Continuity and Change in the State’s Health Care Policy for Low-Income Groups
Notes 53
Appendix: List of People Interviewed 55
About the Authors
vi
57
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
51
Highlights of the Report
C
olorado, in the spirit of its frontier heritage, places a premium on independence and self-determination. Public policymaking in the area of
health care reflects the value the state attaches to local solutions for
local problems and private-sector initiatives. Efforts to reduce the size
of government and grant more authority to localities are under way, and it has
been predicted that with additional federal leeway—for example, Medicaid
block grants—the state would shift even more responsibility to local governments. Fiscal policies currently in force tightly constrain public revenues and
expenditures, even as the state economy surges upward.
In further keeping with its desire for smaller government and independence from federal control, the state has resisted expanding entitlement programs. Consequently, Colorado’s Medicaid program is fairly lean, and at one
point the legislature even voted to abolish it—an act that was subsequently
vetoed by the governor. Modest expansions in health care coverage have come
through Colorado’s own state-supported health programs, rather than through
the federal entitlement of Medicaid. In the opinion of some observers, the
state’s minimalist approach to financing health insurance for low-income
people is sufficient, given the availability of public hospitals and, as a last
resort, emergency rooms.
Health policy developments in Colorado in recent years have emerged
from political consensus between conservative and liberal, as well as urban
and rural, factions. Colorado is a very rural state geographically, with nearly
half of its counties containing six or fewer persons per square mile; however, only about 15 percent of the state’s population lives in nonmetropolitan
areas. Relative to the national average, Colorado’s population is young, fastgrowing, and increasingly wealthy. Colorado is a fiscally conservative state,
although there are pockets of liberalism in some urban areas. The state’s conservative nature is evident in its budgetary policies. A citizen-initiated referendum passed in November 1992, referred to as TABOR (Taxpayers’ Bill
of Rights), made an earlier 6 percent annual limit on state budget growth
part of the state constitution. Any excess revenues in a given year must be
refunded to the taxpayers of Colorado, which occurred for the first time in
1997. Because TABOR for the most part is a “zero-sum game,” Medicaid, with
its high rate of growth in recent years, is viewed as a limit to flexibility in
financing other state activities.
Medicaid receives considerable attention from the Colorado legislature,
but largely with an eye to keeping the program from growing ever larger. In
1995, Medicaid accounted for 18.2 percent of state general fund expenditures, up from 10.4 percent in 1990. With a growth rate of 20.8 percent over
that period, it was the fastest growing major public expenditure. The goal
of the state seems to be to achieve savings in Medicaid and direct some of
those dollars to health programs that avoid the eligibility and benefit
requirements of Medicaid. Limiting program eligibility primarily to federally mandated categories is one strategy the state has adopted to achieve savings. The legislature’s main initiatives to expand Medicaid coverage, authorized in the 1997 session, are buy-in programs for former welfare and
disabled Medicaid recipients who return to work, which will extend their
Medicaid coverage indefinitely. The buy-in nature of the program is consistent with Colorado’s philosophy of making health care available without
increasing government outlays.
Increasing the proportion of Medicaid recipients enrolled in managed care
is another means Colorado has employed to reduce state expenditures.
Colorado has been a forerunner in the area of Medicaid managed care. The state
was one of the first to obtain a federal waiver to mandate that recipients enroll
in a primary care case management (PCCM) program. A decade before that, in
the mid-1970s, the first health maintenance organization (HMO) in the state to
contract with Medicaid began to enroll beneficiaries voluntarily in a full-risk
arrangement. Only recently, however, has the number of beneficiaries in HMOs
increased substantially. HMO enrollment is proceeding rapidly under a state
policy of moving PCCM enrollees into HMOs if their physician case manager
belongs to the network of a Medicaid HMO. A relatively new Medicaid-only
HMO, Denver-based Colorado Access, has benefited the most from this
“rollover” policy and now counts as its membership more than half of the
state’s Medicaid HMO enrollees. Legislation signed into law on June 3, 1997,
builds on Colorado’s current efforts and establishes the goal of 75 percent
enrollment of Medicaid clients in managed care by the year 2000. Currently,
any HMO may participate in Medicaid if it meets the requirements of the contract, but by January 1999, the state plans to institute competitive bidding for
contracts. Colorado Access, which is thriving financially, is concerned that
competitive bidding could force it to reduce payments to safety net providers in
its network, which in turn could adversely affect the providers’ ability to serve
the uninsured.
2
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
Working outside the confines of Medicaid, the state has operated several
smaller state-only health care programs, including the Colorado Indigent Care
Program (CICP) and the Child Health Plan (CHP). CICP provides inpatient and
outpatient coverage for uninsured residents of all ages with income and assets
below 185 percent of the federal poverty level. The program is essentially a
means to reimburse providers for a fraction (less than 30 percent) of the uncompensated care they provide. In fiscal year (FY) 1996 there were 133,772 unduplicated CICP users with 574,096 visits to hospitals and clinics. Funding for hospitals under CICP, which comes largely through the Medicaid disproportionate
share hospital (DSH) program, equaled $34 million in 1996. Standard DSH payments to hospitals totaled $36 million in 1996–97. Denver Health Medical
Center and University Hospital are major recipients of both programs, as is the
state, which retained $150 million of the $361 million in federal matching funds
generated through the DSH program between FY 1993-94 and FY 1996-97.
Prior to 1998, the CHP covered outpatient services for low-income children
in rural areas under age 13 whose family income fell under 185 percent of the
federal poverty level. Families paid an annual premium of $25 per child. Under
the state’s recently passed House Bill 97-1304, the CHP is merged with CICP
funding for children. Through capitated managed care plans, the new program
offers inpatient and outpatient services for both rural and urban children up to
age 18. One new source of program funds is a portion of the savings from
expanding Medicaid managed care. In addition, the state has received federal
approval for its plan under the new Title XXI (the State Children’s Health
Insurance Program). With the flexibility to require cost-sharing that is not
allowed under Medicaid, the CHP program and its predecessor permit Colorado
to emphasize individual responsibility. Moreover, the state’s preference for
private-sector solutions is evidenced in a related plan to use Title XXI funds to
buy into employer-sponsored coverage for eligible children whose working parent has the option but cannot afford it.
The health care market in Colorado is undergoing rapid change. Informed estimates are that as much as 80 percent of the privately insured market in Colorado
is enrolled in either HMOs or preferred provider organizations (PPOs). As elsewhere, this trend has put considerable pressure on providers, especially hospitals,
to reduce prices and become more efficient. Mergers and joint ventures to reduce
redundancies and to achieve economies of scale in purchasing, administration,
and even patient care are commonly employed tools of efficiency that have been
utilized in Colorado. Local hospitals that fear for their survival have merged with
national hospital systems to take advantage of volume purchasing and reductions in administrative costs. Five major national hospital systems now own
numerous hospitals in Colorado. And, since four of these systems have paired off
to form joint ventures for their Colorado hospitals, there are really only three independent hospital systems in Colorado. Private insurance coverage is strong in the
state, which helps to explain why the overall rate of uninsurance is low. An
unusual number of small employers provide coverage to their workers, likely
reflecting the good employment opportunities in these small firms and some of the
small-group reforms enacted in Colorado to enhance the health insurance market.
THE URBAN
INSTITUTE
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
3
Colorado has a relatively strong safety net of hospitals and clinics, supported
in part by the CICP and DSH programs. The state’s public health system also meets
some of the important health care needs of the uninsured, although increasingly
the state is encouraging county health departments to shift their focus to core public health services, such as health promotion and infectious disease control. The
Denver area boasts a particularly strong health care safety net, which is a dynamic
component of the city’s highly competitive health care market. Throughout the
1990s, Denver has witnessed a consolidation of multiple hospitals into three large
systems. Its large safety net providers, Denver Health and Hospital Authority (a
publicly funded system that links a large hospital and 10 federally qualified health
centers) and University Hospital, are independent but large and financially sound
enough to be formidable competitors in the market, especially for Medicaid
patients. Nevertheless, the safety net’s financial stability may be somewhat
tenuous. The number of uninsured and underinsured persons in Colorado is
apparently on the rise as a result of the increasing number of jobs that do not
include health insurance benefits. In addition, more players are entering the
Medicaid market through managed care contracts; the higher level of uncompensated care costs shouldered by safety net providers may render them comparatively less attractive to Medicaid-contracting HMOs.
As additional means to maximize state flexibility, Colorado has increasingly
relied on Medicaid home and community-based care waivers and the statefunded Home Care Allowance program to deliver long-term care services.
Nonetheless, institutional care, particularly nursing home care, still accounts
for the majority of long-term care spending in Colorado, especially among the
elderly population. The state has made greater strides in delivering Medicaid
home and community-based care to persons with mental and developmental
disabilities. In the area of mental health, growth in noninstitutional care alternatives has been stimulated by the Medicaid Mental Health Capitation pilot
project, which is scheduled to be statewide in 1998. In the area of developmental disabilities, Medicaid waivers are the dominant vehicle for providing
services. These waiver programs have generated controversy—and even lawsuits—as a result of lengthy waiting lists.
The chief challenge facing Colorado in the future will be how well the state
can respond to an economic downturn. State programs, including Medicaid,
offer only limited protections to Colorado’s citizens. The current low rates of
uninsurance are due to a healthy economy and large numbers of small firms
offering insurance to their employees. These factors could change suddenly,
however. And the state’s system of support is not well equipped to expand to
meet greater needs. The constitutionally required spending limits and the lean
nature of the current Medicaid program mean that there is little room to stretch
resources further. In addition, Colorado’s emphasis on moving its Medicaid
recipients into managed care may place some strains on a relatively healthy system of safety net providers that currently serve the uninsured.
4
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
Thumbnail Sketch
of the State
Sociodemographic Characteristics
W
ith a population of 3.7 million, Colorado contains only 1.4 percent
of the U.S. population. It ranks considerably below the national
average in terms of percentage of persons ages 65 and over—8.5
percent versus 12.1 percent nationally in 1994–95. A larger share
of the state’s population as compared with the national average is Hispanic,
but African Americans are underrepresented in Colorado, making up only 2.9
percent of the total population. Like many of the mountain states, Colorado far
exceeds the United States as a whole in population growth (13.7 percent versus 5.6 percent between 1990 and 1995). Although Colorado is a very rural
state, with 31 of its 63 counties classified as “frontier,” only about 15 percent
of the state’s population lives in nonmetropolitan areas. Its urban population
is heavily concentrated on the “front range” of the state in a line that stretches
north and south, encompassing areas north of Denver, and south through
Colorado Springs and Pueblo (table 1).
Economic Status
Colorado’s economy has made a strong recovery from the period when the
state’s oil industry collapsed in the late 1980s and early 1990s. During this time,
Table 1 State Characteristics
Colorado
United States
Sociodemographic
Population (1994–95)a (in thousands)
Percent under 18 (1994–95)a
Percent 65+ (1994–95)a
Percent Hispanic (1994–95)a
Percent Non-Hispanic Black (1994–95)a
Percent Non-Hispanic White (1994–95)a
Percent Non-Hispanic Other (1994–95)a
Percent Noncitizen Immigrant (1996) *
Percent Nonmetropolitan (1994–95)a
Population Growth (1990–95)b
3,689
26.5%
8.5%
11.8%
2.9%
82.7%
2.6%
5.1%
15.1%
13.7%
260,202
26.8%
12.1%
10.7%
12.5%
72.6%
4.2%
6.4%
21.8%
5.6%
Economic
Per Capita Income (1995)c
Percent Change in Per Capita Personal Income (1990–95)c, d
Percent Change in Personal Income (1990–95)c, e
Employment Rate (1996)f, g
Unemployment Rate (1996)f
Percent below Poverty (1994)h
Percent Children below Poverty (1994)h
23,961
24.6%
41.3%
69.3%
4.2%
9.3%
12.4%
23,208
21.2%
27.7%
63.2%
5.4%
14.3%
21.7%
Health
Percent Uninsured—Nonelderly (1994–95)a
Percent Medicaid—Nonelderly (1994–95)a
Percent Employer Sponsored—Nonelderly (1994–95)a
Percent Other Health Insurance—Nonelderly (1994–95)a, i
Smokers among Adult Population (1993)j
Low Birth-Weight Births (<2,500 g) (1994)k
Infant Mortality Rate (Deaths per 1,000 Live Births) (1995)l
Premature Death Rate (Years Lost per 1,000) (1993)m, n
Violent Crimes per 100,000 (1995)o
AIDS Cases Reported per 100,000 (1995)j
14.0%
5.9%
72.2%
8.0%
23.8%
8.5%
7.1
47.3
440.2
18.0
15.5%
12.2%
66.1%
6.2%
22.5%
7.3%
7.6
54.4
684.6
27.8
Political
Governor’s Affiliation (1996)p
Party Control of Senate (Upper) (1996)p
Party Control of House (Lower) (1996)p
D
15D-20R
24D-41R
a. Two-year concatenated March Current Population Survey (CPS) files, 1995 and 1996. These files are edited by the Urban
Institute’s TRIM2 microsimulation model. Excludes those in families with active military members.
b. U.S. Bureau of the Census, Statistical Abstract of the United States: 1996 (116th edition). Washington, DC, 1996. 1995 population as of July 1. 1990 population as of April 1.
c. State Personal Income, 1969–1995. CD-ROM. Washington, DC: Regional Economic Measurement Division (BE-55), Bureau of
Economic Analysis, Economics and Statistics Administration, U.S. Department of Commerce, October 1996.
d. Computed using mid-year population estimates of the Bureau of the Census.
e. Personal contributions for social insurance are not included in personal income.
f. U.S. Department of Labor. State and Regional Unemployment, 1996 Annual Averages. USDL 97-88. Washington, DC, March
18, 1997.
g. Employment rate is calculated using the civilian noninstitutional population 16 years of age and over.
h. CPS three-year average (March 1994–March 1996, where 1994 is the center year) edited using the Urban Institute’s TRIM2
microsimulation model.
i. “Other” includes persons covered under CHAMPUS, VA, Medicare, military health programs, and privately purchased coverage.
j. Normandy Brangen, Danielle Holahan, Amanda H. McCloske y, and Evelyn Yee. Reforming the Health Care System: State Profiles
1996. Washington, DC: American Association of Retired Persons, 1996.
k. S.J. Ventura, J.A. Martin, T.J. Mathews, and S.C. Clarke. “Advance Report of Final Natality Statistics, 1994.” Monthly Vital
Statistics Report, vol. 44, no. 11, supp. Hyattsville, MD: National Center for Health Statistics, 1996.
l. National Center for Health Statistics. “Births, Marriages, Divorces, and Deaths for 1995.” Monthly Vital Statistics Report, vol. 44,
no. 12. Hyattsville, MD: Public Health Service, 1996.
m. ReliaStar Financial Corporation . The ReliaStar State Health Rankings: An Analysis of the Relative Healthiness of the
Populations in All 50 States, Minneapolis, MN: ReliaStar, 1996.
n. Race-adjusted data, National Center for Health Statistics, 1993.
o. U.S. Department of Justice, FBI. Crime in the United States, 1995. October 13, 1996.
p. National Conference of State Legislatures . 1997 Partisan Composition, May 7 Update. D indicates Democrat and R indicates
Republican.
6
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
state government was affected as well. In fiscal year (FY) 1991-92 the state budget was cut by more than 2.5 percent. Colorado’s subsequent economic recovery
is apparent from a number of indicators. In 1996, unemployment stood at just
4.2 percent, compared with a national average of 5.4 percent. The overall
employment rate is also higher than the national average, reflecting both the
low rate of unemployment and the relatively small proportion of older
Coloradans. Per capita personal income has risen by nearly one-quarter since
1990, and because the population has been growing rapidly since the beginning
of the decade, personal income growth is very high (41.3 percent from 1990 to
1995 compared with the national average of 27.7 percent), indicating a substantial economic base from which the state could potentially draw revenues.
These statistics also translate into a lower overall poverty rate (9.3 percent in
1994) for Colorado compared with the United States as a whole, and a substantially lower rate of children in poverty (12.4 percent) (table 1). In fact, these
rates are among the lowest in the country.
Political and Budgetary Landscapes
Colorado is a conservative state, with Republicans holding a commanding
margin in both houses of the legislature. There is a split within the Republican
party, however, between the socially conservative religious right and the fiscally
conservative business community. The governor, Roy Romer, is a third-term
Democrat who has been able to work with the legislature to avoid deadlock,
particularly in the 1997 legislative session. The governor’s priorities have
included a number of children’s initiatives that have been relatively well
received by the legislature.
Colorado’s general approach to policymaking appears to be one of making
incremental changes, a strategy that seems to have resulted in areas of compromise between the governor and the legislature. This balance may change substantially in the future because term limits in Colorado will have a major impact
on the composition of the state legislature. In 1998, 28 of 100 legislators will
be precluded from running for reelection, including all of the leadership and a
majority of the members of the powerful Joint Budget Committee. Whether
new legislators will be as interested in seeking consensus is unknown. The
result of the coming gubernatorial election (Governor Romer cannot run again)
may also affect consensus building and policymaking.
As in many states with a concentrated urban population and a large geographic area that has very low population density, Colorado’s political divisions often reflect urban-rural tensions. In addition, pockets of very conservative and very liberal citizens can be found throughout the state. For example,
the Colorado Springs area has a very strong religious community that has
pushed for conservative social legislation, and Boulder has a strong liberal
community that has concerns about issues such as the environment and
development.
THE URBAN
INSTITUTE
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
7
Factors other than urban-rural and conservative-liberal splits are equally
important in understanding the political environment in Colorado—namely,
the strong fiscal constraints that the state has imposed on both its revenues
and expenditures. In the late 1970s, a 7 percent spending limit was in force. A
6 percent limit was enacted in the 1980s. Building upon these restrictions are
even more stringent limits passed in November 1992 as a citizen-initiated
referendum. Variously referred to as TABOR (Taxpayers’ Bill of Rights),
Amendment #1, or the Bruce Amendment (after its author), the referendum
made the earlier 6 percent spending limit part of the state constitution.
With few exceptions, TABOR affects all public spending and requires that
if revenues raised exceed the limit (as described below), the excess must be
refunded to the citizens of Colorado. A refund was triggered for the first time
in 1997. The state will return $139 million to taxpayers, largely as credits
against 1997 taxes. Fiscal projections suggest similar situations will arise over
the next five years.
TABOR limits (with only a few exemptions) the percentage increase in state
public revenues and spending to either inflation plus the percentage change in
state population in the prior calendar year or 6 percent, whichever is lower. In
practice, the 6 percent limit has been the binding constraint. These restrictions
effectively preclude the state coffers from benefiting from real per capita growth
in state income without voter approval. For local districts, the maximum percentage increase in revenues and spending that is allowed is inflation in the
prior year plus growth in property values.
TABOR expenditure limits can be exceeded only by voter approval through
a specific ballot initiative. Thus far, no ballot initiatives for raising expenditure limits have even secured enough signatures to be put to a vote.
Occasionally, local voters have approved accepting revenues from state or federal sources that would otherwise be subject to TABOR limits.
Partially as a result of TABOR limits, budgeting in Colorado is done incrementally, looking at increases from the base as a means of gauging what is feasible. These limits are particularly important for Medicaid, where spending has
historically risen much faster than overall budget growth allowed each year by
TABOR. Because of its growth rate, Medicaid is viewed as a limit to flexibility
in financing other state activities. Consequently, there is great emphasis on finding savings in the program and little emphasis on expanding it.
8
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
Setting the Policy Context
Overview of the State’s Health Agenda
C
olorado is interested in innovations in health care, particularly on an
incremental basis, but this interest must be understood in the context
of a fiscally conservative political environment. Innovations that cost
little or actually save the state money are highly prized.
Only a short time ago, Colorado attempted a broad-scale reform of its health
care system. In 1992, the Colorado General Assembly directed the Romer
administration to study a proposal for universal health insurance called
ColoradoCare. The governor established the Health Care Reform Initiative
office, which produced a feasibility study of ColoradoCare. The proposal called
for income- and payroll-tax financing and a single, government-run purchasing cooperative. These two features drew much fire, and the full proposal was
never introduced as legislation. In 1994, the legislature instead enacted private insurance reforms, as discussed below.
The Colorado legislature gives considerable attention to Medicaid, but
largely with an eye to keeping it from growing ever larger. Expansions of health
insurance coverage are more likely to come outside of Medicaid to avoid
expanding entitlement to a generous benefit package. Hence, Colorado has several state-only programs and initiatives, including, for example, the newly
enacted Children’s Basic Health Plan (CBHP) and the long-standing Old Age
Pension (OAP) program. Many of these programs are quite small, however. The
challenge for the state seems to be to achieve savings in Medicaid and direct
some of those dollars to health programs that avoid the eligibility and benefit
constraints of Medicaid. Expansion of Medicaid managed care is a high priority
for the state as a means to achieve program savings. In long-term care, Colorado
views its Medicaid home and community-based care waivers as successfully
holding down costs.
State Health Care Indicators
Indicators of health status offer a picture of a population that varies from the
national average in some key areas. The share of smokers and the percentage
of low birth-weight births are slightly above national averages, but infant mortality and premature death rates are lower than those for the United States as a
whole. The incidences of violent crimes and reported AIDS cases are substantially lower in Colorado than they are nationwide, which relieves the state of
some major problems facing other areas. Overall, Colorado’s population is
younger than the national average, limiting the higher costs associated with an
aging population (table 1).
Health Care Spending and Coverage
The proportion of uninsured in Colorado, at 14 percent, is not as far below
the national average of 15.5 percent as might be expected given the state’s booming economy. Employer-sponsored insurance is relatively prevalent in Colorado,
but the reason the percentage of uninsured is still relatively high seems to be
because of the small proportion of the population covered by Medicaid. At
5.9 percent, participation by the nonelderly population in Medicaid is less than
half the national average of 12.2 percent and lowest among all the states (table 1).
(These percentages represent the proportion of persons covered by Medicaid and
no other form of insurance during 1994–95. In Colorado, the percentage of the
nonelderly population that received Medicaid coverage in 1995, regardless of
whether they were also covered by another form of insurance at another point
during the year, approached 10 percent.)
10
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
State Health Programs
I
n Colorado, three agencies are responsible for most health programs. The
Department of Health Care Policy and Financing administers Medicaid and
a number of state-only health programs. The department was created in 1994
by merging several health care programs and activities, including Medicaid,
the Health Data Commission (no longer in existence), and health policy functions
of the governor’s office, into a single department. Medicaid was removed from
the Department of Social Services, which was renamed the Department of
Human Services. The Department of Human Services is responsible for overseeing mental health and developmental disabilities programs, managing the decentralized intake system that determines eligibility for long-term care services,
managing eligibility determination for Medicaid in general, and overseeing the
Old Age Assistance programs that often supplement Medicaid long-term care services. The Department of Public Health and Environment is responsible for public health programs, including family and community health services and disease control and prevention services. A fourth agency, the Department of
Regulatory Agencies, handles insurance regulation.
Colorado was described by one state official as “the experiment” in devolution of public programs to localities, particularly in the area of welfare. The
official predicted that under a scenario of Medicaid block grants, the state
would likely devolve many of the rules on eligibility and benefits to counties.
At this time, however, many of Colorado’s public expenditures are highly controlled at the state level. This is particularly true for Medicaid and for some of
the state-only programs that supplement it. Modest local cost sharing is
required of some programs. The intake process for determining general
Medicaid eligibility and qualification for long-term care services takes place at
the local level, although the rules and protocols are developed by the
Department of Human Services. Given this shared state-local responsibility, it
is not clear how much variation in eligibility determination exists across the
state. In the area of public health, local units operate fairly independently of the
state and rely a great deal on local taxes.
Medicaid
In 1995, as shown in table 2, Medicaid represented 18.2 percent of state
general fund expenditures, up from 10.5 percent in 1990. With a growth rate
of more than 20 percent annually from 1990 to 1995 (both general fund and
total expenditures), Medicaid was the fastest growing major public expenditure; its growth rate was more than double that for all general fund spending. It should hardly be surprising, then, that Medicaid is a major concern
of state legislators, particularly with Colorado’s constitutionally mandated
limits on expenditure growth. Medicaid spending directly reduces the state’s
ability to raise its spending in other areas, a circumstance noted by many of
those interviewed.
Colorado’s Medicaid program is quite limited compared with those of other
states. For example, Colorado has no medically needy program, and for the population under age 65 the state covers only the required groups. Some expansions, such as eliminating asset tests for children and adults, have been debated
but not adopted. Colorado has expanded coverage for the elderly slightly
beyond what is required; in particular, it covers persons with incomes up to
300 percent of the Supplemental Security Income (SSI) level for nursing home
care and the home and community-based care waiver. This optional eligibility
category offers greater protection than the mandated minimum but substantially
less than that afforded under a medically needy program.
Between 1990 and 1992, Medicaid expenditures grew 33.5 percent per year
to a level of more than $1 billion. Growth was particularly high in 1990 as a
result of an expansion in children’s coverage. Between 1992 and 1995, expenditures grew at a much lower average annual rate of 15.3 percent, reaching
$1.57 billion. The decline was particularly dramatic in 1995. Colorado’s growth
rates in both periods exceeded that for the United States as a whole. From 1992
to 1995, the average annual rate of growth was more than 50 percent higher than
that for the country overall (table 3).
The substantial deceleration in Colorado’s Medicaid expenditure growth
after 1992 occurred in all major expenditure categories. The most notable dropoff was in disproportionate share hospital (DSH) spending growth. DSH expenditures rose from just $4 million in 1990 to $120.8 million in 1992, for an average annual growth rate of 450 percent. Growth in the DSH program continued
from 1992 to 1995, although at a much reduced rate of 43 percent per year.
Throughout the first half of the decade, particularly from 1990 to 1992, acute
care spending rose faster than long-term care spending in Colorado. The considerable increase in spending on children and adults from 1990 to 1992
12
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
Table 2 Colorado Spending by Category, 1990 and 1995 ($ in Millions)
State General Fund Expendituresa
Total Expendituresb
Program
1990
1995
Annual
Growth
1990
1995
Total
$2,577
$3,884
8.6%
$5,292
$8,082
8.8%
Medicaidc, d
% of Total
270
(10.5)
708
(18.2)
21.3
—
584
(11.0)
1,505
(18.6)
20.8
—
Corrections
% of Total
153
(5.9)
290
(7.5)
13.6
—
171
(3.2)
320
(4.0)
13.4
—
1,081
(41.9)
1,548
(39.9)
7.4
—
1,187
(22.4)
1,720
(21.3)
7.7
—
35
(1.4)
42
(1.1)
3.7
—
117
(2.2)
124
(1.5)
1.2
—
Higher Education
% of Total
518
(20.1)
643
(16.6)
4.4
—
1,000
(18.9)
1,265
(15.7)
4.8
—
Miscellaneouse
% of Total
520
(20.2)
653
(16.8)
4.7
—
2,233
(42.2)
3,148
(39.0)
7.1
—
K–12 Education
% of Total
AFDC
% of Total
Annual
Growth
Source: National Association of State Budget Officers, 1992 State Expenditure Report (April 1993) and 1996 State
Expenditure Report (April 1997).
a. State spending refers to general fund expenditures plus other state fund spending for K–12 education.
b. Total spending for each category includes the general fund, other state funds, and federal aid.
c. States are requested by the National Association of State Budget Officers (NASBO) to exclude provider taxes, donations, fees, and assessments from state spending. NASBO asks states to report these separately as “other state funds.” In some
cases, however, a portion of these taxes, fees, etc., is included in state spending because states cannot separate them. Colorado
reported other state funds of $11 million in 1990 and $1 million in 1995.
d. Total Medicaid spending will differ from data reported on the HCFA 64 for three reasons: first, NASBO reports on the
state fiscal year and the HCFA 64 on the federal fiscal year; second, states often report some expenditures, e.g., mental
health and/or mental retardation, as other health rather than Medicaid; third, local contributions to Medicaid are not
included but would be part of Medicaid spending on the HCFA 64.
e. This category includes all remaining state expenditures (i.e., environmental projects, transportation, housing, and
other cash assistance programs) not captured in the five listed categories.
coincides with the rapid increase in acute care expenditures, as these groups
are primarily users of acute care services (table 3).
In 1995, acute care benefits constituted 43 percent of Medicaid expenditures
in Colorado, and long-term care benefits accounted for 31 percent. The remaining expenditures were DSH payments (23 percent) and administration (3 percent). The DSH proportion in Colorado was substantially higher than the
national average of 12 percent.
Another way to compare expenditures in Colorado with national spending
is on a per recipient basis. In 1995, Colorado’s expenditures per elderly recipient and blind or disabled recipient were lower than the national averages,
whereas per recipient expenditures for children and adults were higher than
those for the United States as a whole (table 4). In the aggregate, Colorado’s
Medicaid spending per participant is just below the national average. However,
the number of participants as a share of the population is lower in Colorado
than in other states.
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13
14
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
$871.9
493.7
378.2
$871.9
$244.5
49.3
195.2
$323.9
155.8
168.1
$138.4
$165.2
$120.8
$35.7
$536.5
254.8
281.7
$536.5
$175.8
34.5
141.3
$227.2
97.1
130.1
$54.7
$78.8
$4.0
$36.5
1992
$1,028.4
1990
$577.1
$1,170.5
679.7
490.8
$1,170.5
$335.2
69.0
266.2
$447.2
243.6
203.6
$168.0
$220.0
$354.8
$49.2
$1,574.5
1995
Colorado
Source: The Urban Institute, 1997. Based on HCFA 2082 and HCFA 64 data.
Total
Benefits
Benefits by Service
Acute Care
Long-Term Care
Benefits by Group
Elderly
Acute Care
Long-Term Care
Blind and Disabled
Acute Care
Long-Term Care
Adults
Children
DSH
Administration
Expenditures
27.5%
39.2%
15.9%
27.5%
17.9%
19.5%
17.5%
19.4%
26.6%
13.7%
59.0%
44.8%
449.6%
–1.1%
33.5%
1990–92
10.3%
11.2%
9.1%
10.3%
11.1%
11.9%
10.9%
11.3%
16.1%
6.6%
6.7%
10.0%
43.2%
11.3%
15.3%
1992–95
Average Annual Growth
1990
$69,168.7
36,904.5
32,264.2
$69,168.7
$23,334.3
4,925.4
18,408.9
$25,771.6
12,929.2
12,842.4
$8,765.0
$11,297.8
$1,340.9
$3,152.6
$73,662.2
$97,602.4
55,059.9
42,542.5
$97,602.4
$31,757.9
6,911.5
24,846.4
$35,684.6
19,483.6
16,201.0
$12,710.1
$17,449.8
$17,525.6
$3,797.9
$118,926.0
1992
Expenditures
$133,434.6
79,438.5
53,996.1
$133,434.6
$40,087.4
9,673.7
30,413.7
$51,379.4
29,760.7
21,618.7
$16,556.9
$25,410.9
$18,988.4
$5,449.4
$157,872.5
1995
United States
Table 3 Medicaid Expenditures by Eligibility Group and Type of Service, Colorado and United States ($ in Millions)
18.8%
22.1%
14.8%
18.8%
16.7%
18.5%
16.2%
17.7%
22.8%
12.3%
20.4%
24.3%
261.5%
9.8%
27.1%
1990–92
11.0%
13.0%
8.3%
11.0%
8.1%
11.9%
7.0%
12.9%
15.2%
10.1%
9.2%
13.3%
2.7%
12.8%
9.9%
1992–95
Average Annual Growth
THE URBAN
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15
1992
$7,059
4,318
13,520
$7,764
7,743
7,795
$1,656
$971
$2,642
1995
$8,493
5,297
16,028
$7,461
7,385
7,573
$1,814
$1,247
$3,176
15.2%
15.7%
14.9%
6.3%
7.3%
4.8%
31.5%
19.9%
8.7%
1990–92
6.4%
7.0%
5.8%
–1.3%
–1.6%
–1.0%
3.1%
8.7%
6.3%
1992–95
Average Annual
Growth
Source: The Urban Institute, 1997. Based on HCFA 2082 and HCFA 64 data.
$5,315
3,225
10,241
$6,877
6,728
7,098
$958
$675
By Group
Elderly
Cash
Noncash
Blind and Disabled
Cash
Noncash
Adults
Children
1990
$2,237
Total
Spending per
Enrollee
Colorado
1990
$6,839
3,329
10,377
$6,378
4,969
12,047
$1,301
$770
$2,397
1992
$8,422
4,017
12,192
$7,320
5,927
12,574
$1,518
$931
$2,729
$9,738
4,818
13,521
$8,022
6,686
12,660
$1,728
$1,178
$3,202
1995
United States
Spending per
Enrollee
Table 4 Medicaid Expenditures per Enrollee by Eligibility Group, Colorado and United States
11.0%
9.8%
8.4%
7.1%
9.2%
2.2%
8.0%
9.9%
6.7%
1990–92
5.0%
6.2%
3.5%
3.1%
4.1%
0.2%
4.4%
8.2%
5.5%
1992–95
Average Annual
Growth
Department of Public Health and Environment
Colorado’s Department of Public Health and Environment, with a budget of
$203 million in FY 1996-97, administers an array of programs that target the
health of populations at large as well as the health of low-income individuals.
Within the department’s Office of Health, programs with a population orientation
include disease control, epidemiology, and prevention. The Division of Family
and Community Health Services—the largest division in the Office of Health in
terms of funding—focuses primarily on the health of vulnerable individuals.
Programs in this division include maternal and child health, family planning,
migrant health, and the Women, Infants, and Children (WIC) nutrition program.
The department is very dependent on federal funds for its operations;
reportedly, the legislature is reluctant to support any programs not attached to
federal monies. However, recent departmental efforts to gain greater legislative
support, combined with a robust state economy, resulted in the department’s
largest ever general fund increase—20 percent—for FY 1997-98. The actual
infusion of new dollars is rather small, as general fund support comprised only
8 percent of the department’s total budget in FY 1996-97. In contrast, the percentage of funding derived from federal sources is striking and has increased
significantly for the Office of Health—from 74 percent in FY 1990-91 to 85 percent in FY 1996-97. The programs that receive the largest amount of federal
monies are the WIC program and another supplemental nutrition program,
totaling $75 million in federal funds in FY 1996-97.1
Mental Health and Developmental Disabilities
Oversight of mental health and developmental disabilities programs resides
in the Department of Human Services. The department’s Health and
Rehabilitation Programs Office houses the Division of Mental Health Services
and the Division of Developmental Disabilities Services. Localities are responsible for community-based services; the state’s role in service provision is
largely limited to institutional care.
The Division of Mental Health Services operates through 17 community
mental health centers (CMHCs). The CMHCs are the entry points for statesponsored mental health services and are responsible for providing or
contracting for a range of services in their area. In FY 1995-96, 43 percent of the
$136 million in funding for the CMHCs was from Medicaid; this share has continued to increase over time. The next largest category is state funds (excluding
Medicaid matching funds), which comprised 23 percent of revenues.2
Responsibility for the provision of services to persons with developmental
disabilities is primarily held by local jurisdictions. County or multi-county
community centered boards (CCBs) are responsible for eligibility determina-
16
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
tion, service plan development, and arrangement for, purchase of, or direct
delivery of services. The CCB system began in 1964 and today consists of 20 private nonprofit organizations that serve as the single entry point into the longterm care system for persons with developmental disabilities. Approximately
90 percent of developmentally disabled persons are covered by Medicaid, and
in 1995, 62 percent of the $147 million in total revenues for the CCBs originated
from Medicaid.3
THE URBAN
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HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
17
Assessing the New Federalism:
Potential State Responses
to Additional Flexibility
and Reduced Funding
M
any Colorado policymakers have expressed to the federal government a strong desire for increased flexibility for health and social
services programs. The Colorado legislature’s resistance to federal
constraints is apparent in its dislike of the entitlement nature of
Medicaid, specifically its mandatory benefits and eligibility rules. At one point
the legislature voted to withdraw from the Medicaid program entirely unless
the federal government granted a comprehensive waiver, but Governor Romer
vetoed the legislation. Recognition of the importance of federal contributions
led the state to abandon that strategy. Rather than maximize federal contributions through Medicaid eligibility expansions, Colorado uses state-only programs where feasible to ensure flexibility and limit entitlement to new benefits.
For example, even before the State Children’s Health Insurance Program was
passed at the federal level, the state developed a children’s insurance initiative
outside of Medicaid. The state’s heavy reliance on Medicaid home and community-based care waivers to deliver long-term care services is another effort to
maximize flexibility.
The general philosophy of Colorado toward health care for the poor seems
to be one of providing a floor while avoiding the establishment of new entitlements. Colorado’s minimalist approach stems less from a fear that it will
become a welfare magnet—particularly since it is less generous than many
states—than from a desire to limit the role of government in the lives of its citizens.
There is some sympathy, however, for those who are uninsured and ineligible
for health benefits extended through welfare—especially children. Indeed,
Colorado has had serious debates about trying to expand health coverage to all
citizens, and it has undertaken a number of interesting but limited state-only
programs. These efforts are tempered by the view of some that emergency
health care is available to those with serious health problems and that such care
can serve as a sufficient safety net.
20
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
Providing Third-Party
Health Coverage for the
Low-Income Population
D
espite its limited nature in Colorado, the Medicaid program is still the
main vehicle for providing health coverage to the low-income population. For some uninsured Coloradans not eligible for Medicaid,
health care is partially reimbursed through the Colorado Indigent Care
Program (CICP). Children not otherwise covered may be eligible for the Child
Health Plan (CHP, recently scheduled to be replaced by the Children’s Basic
Health Plan). Other state programs target specific populations, such as the Old
Age Pension program, or specific health problems, such as the Colorado
Prenatal Plus program. In FY 1996, about 15 percent of Coloradans received
health care services financed either through Medicaid or other publicly funded
programs.4 In 1995, an estimated 540,000 Coloradans were uninsured, of whom
150,000 were children. Many must rely on charity care at hospitals and clinics
because they cannot afford to pay out of pocket.
Medicaid Eligibility
The number of persons covered by Colorado’s Medicaid program in 1995
was 368,500 (table 5). (The Department of Health Care Policy and Financing
reported Medicaid enrollment of 280,578 in 1995. This figure represents the
average monthly case load or “full-time equivalent” enrollees, and thus is
lower than total enrollment shown in table 5 because not all Medicaid
enrollees remain in the program for an entire year.) The 1995 number
22
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
33.1
33.0
57.1
47.2
9.9
116.6
97.7
18.9
By Group
Elderly
Blind and Disabled
Adults
Cash
Noncash
Children
Cash
Noncash
34.6
41.7
83.5
58.0
25.5
170.1
114.3
55.9
330.0
1992
39.5
59.9
92.6
47.6
45.0
176.5
95.6
80.9
368.5
1995
Source: The Urban Institute, 1997. Based on HCFA 2082 data.
239.9
1990
Total
Enrollment
Colorado
2.3%
12.4%
20.9%
10.8%
60.5%
20.8%
8.1%
72.0%
17.3%
1990–92
4.5%
12.8%
3.5%
–6.4%
20.9%
1.2%
–5.8%
13.1%
3.7%
1992–95
Average Annual
Growth
1990
3,412.2
4,040.9
6,738.7
4,651.6
2,087.2
14,664.9
9,946.2
4,718.7
28,856.7
3,771.0
4,875.1
8,373.3
5,342.5
3,030.9
18,745.7
11,281.8
7,463.9
35,765.1
1992
Enrollment
4,116.6
6,405.2
9,584.2
5,441.4
4,142.8
21,566.0
11,314.6
10,251.4
41,672.0
1995
United States
Table 5 Medicaid Enrollment by Eligibility Group, Colorado and United States (Enrollment in Thousands)
5.1%
9.8%
11.5%
7.2%
20.5%
13.1%
6.5%
25.8%
11.3%
1990–92
3.0%
9.5%
4.6%
0.6%
11.0%
4.8%
0.1%
11.2%
5.2%
1992–95
Average Annual
Growth
represents a substantial increase from 239,900 enrollees in 1990. Most of the
growth during this period occurred between 1990 and 1992 among nondisabled adults and children, largely as a result of federally mandated eligibility expansions. The average annual growth rate in enrollment for all eligibility categories was 17.3 percent from 1990 to 1992, versus 3.7 percent from
1992 to 1995. Medicaid enrollment related to Aid to Families with Dependent
Children (AFDC) has been slowly declining (by about 6 percent per year from
1992 to 1995), chiefly because of the strong economy and the resulting lower
AFDC rolls. For the period 1992 to 1995, declines in the AFDC population
were offset somewhat by expansion of coverage for the disabled and nonAFDC low-income pregnant women and children (Baby Care/Kids Care program). Yet growth in these categories is slowing as well. In fact, the Baby
Care/Kids Care population has declined sharply in recent years. The total
number of Medicaid enrollees is projected to rise at a rate of less than 1 percent per year from 1995 to 1998.5
Eligibility Categories
Although the percentage of Colorado’s population that is uninsured is
lower than the national average, the limited coverage under Medicaid suggests that the low-income population remains at considerable risk. Colorado
essentially offers no expanded eligibility for acute care beyond federally
mandated groups and no medically needy program allowing persons to
spend down to eligibility. (As mentioned above, the state does cover the
optional eligibility group of those with incomes less than 300 percent of
the SSI limit for long-term care services.) The income cutoffs for non-AFDC
pregnant women and infants (Baby Care/Kids Care) and children up to age
six are 133 percent of the federal poverty level, per federal requirements.
As mandated, children through age 18 born after September 30, 1983, in
households with incomes up to 100 percent of the federal poverty level are
also covered. Emergency care is provided for noncitizen aliens who have not
established legal residence.
A few changes in Medicaid eligibility were made in the 1997 legislative session. They include authorization to develop buy-in programs for both former
AFDC/Temporary Assistance for Needy Families (TANF) recipients and disabled Medicaid recipients, which will extend Medicaid coverage indefinitely
for these groups after they return to work. A number of interviewees expressed
a belief that until the effects of these changes are fully understood, further
expansions are unlikely.
Eligibility Determination and Enrollment
The Department of Health Care Policy and Financing (HCPF) identified
numerous areas of concern regarding Medicaid eligibility determination. First,
the automated eligibility system for Medicaid is 20 years old and no longer adequate to the task. Partly as a result, the current average eligibility determination processing time is at or slightly above the allowable maximum. Second,
THE URBAN
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23
under welfare reform, the eligibility standards and enrollment processes of
Medicaid and TANF are separate and different. This delinking is expected to
create problems in identifying eligible recipients and enrolling them at the
county level. In addition, HCPF is concerned that some clients will inappropriately lose Medicaid eligibility when disenrolled from TANF. The incentives
counties face to reduce welfare rolls may take precedence over efforts to enroll
or retain eligible persons in Medicaid.
In response to these issues, the state is developing a new automated eligibility system, the Colorado Benefits Management System (CBMS). Under the
CBMS, Medicaid will have a separate eligibility system that will have the capability to interface with eligibility systems for other programs such as TANF
and food stamps. County-level variation in Medicaid participation could still be
an issue, however, if a county’s intake process falls short of identifying all those
who might be eligible. While development of the CBMS is under way, an
interim strategy to speed up the eligibility process that is likely to be adopted
is allowing eligibility determinations as well as enrollment at sites other than
county human services offices. Some concern was expressed that allowing
enrollment at other sites, such as clinics, might conflict with the provision of
full information about managed care options to enrollees, because some sites
may have linkages with particular health maintenance organizations (HMOs).
However, use of an enrollment broker should mitigate this problem.
Other Public Financing Programs
In addition to standard Medicaid, HCPF oversees a number of state-only
health care and special Medicaid programs. These programs include the
Colorado Indigent Care Program, the Child Health Plan/Children’s Basic Health
Plan, the Medicaid transitional benefits program, the Old Age Pension program,
school-based health care, and the Colorado Uninsurable Health Insurance Plan
(CUHIP).
Colorado Indigent Care Program
CICP provides inpatient and outpatient coverage for uninsured residents of
all ages with income below 185 percent of the federal poverty level and assets
below a specified minimum. The program is essentially a means to reimburse
providers for a fraction of the uncompensated care they provide while enhancing access to services for the uninsured. Unlike many other programs, CICP eligibility applications are processed at the provider level. Eligible patients are
responsible for a copayment for each visit, but a ceiling is placed on total
copayments in any one year. In FY 1996 there were 133,772 unduplicated CICP
users with 574,096 visits to hospitals and clinics; about one-third of the users
were children.6 The number of users represents a 40 percent increase over the
past three years.
24
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
To participate in CICP, providers must deliver, at a minimum, charity care
equivalent to 3 percent of revenues. They must also agree to provide at least
$4 worth of charity care for every $3 of CICP funding they receive, making the
theoretical CICP reimbursement 75 percent of costs. Most providers exceed this
requirement and, in fact, are reimbursed much less than the cost of CICP
patients. Before FY 1995, CICP reimbursed providers for about 20 percent of
their costs, with funding for CICP hospitals generated through the Medicaid
DSH program. In 1995, outstate facilities—that is, non-Denver facilities—were
added to the DSH program, which earned additional federal matching funds. As
a result, reimbursement rose to about 29 percent of costs.
Providers have voiced several complaints about CICP. In addition to stressing the inadequacy of the reimbursement level, they view eligibility determination as an administrative burden, and they believe that funds are poorly distributed geographically. For example, University Hospital in Denver and
Denver Health and Hospital Authority (DHH) accounted for more than half of
all CICP funding in FY 1996.
Child Health Plan/Children’s Basic Health Plan
Prior to 1998, the CHP covered outpatient services for low-income children under age 13 in rural areas. The program was further restricted to those
whose family incomes fell under 185 percent of the federal poverty level and
who did not qualify for Medicaid. (The income requirement for CHP was less
stringent than the state’s Medicaid program, as described above.) To participate, families had to pay an annual premium of $25 per child up to a family
maximum of $150 per year. Approximately 6,200 children were enrolled in
the program in 1997.
Under the recently passed House Bill 97-1304, the CHP will be merged with
CICP funding for children and renamed the Children’s Basic Health Plan. The
new program will offer inpatient and outpatient services for both rural and
urban children. It will cover a specified number of children up to age 18 with
family incomes under 185 percent of the federal poverty level. As authorized,
the program does not create an entitlement, so enrollment is subject to available
funding. It is expected that 33,000 to 40,000 children will participate by year
three of the program, when the program is fully phased in. The state expected
to begin enrollment in spring 1998.
Premiums will be assessed on a sliding scale based on income. Families
whose incomes exceed the eligibility limit can buy into the program at full cost,
estimated at $617 to $725 per child annually. Other new funds to support CBHP
will come from savings derived from reimbursement caps on administrative
costs of nursing homes and some of the savings from expanding Medicaid managed care. Although the state originally planned to apply for a Medicaid Section
1115 waiver to obtain federal matching funds for the CBHP, it has applied and
received approval for federal funding under Title XXI (the State Children’s
Health Insurance Program).
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HCPF will contract with managed care plans for capitated service delivery
to CBHP participants. Under limited circumstances, the program will offer a
fee-for-service arrangement. It will also buy into comparable private insurance
coverage for children who meet the eligibility criteria and have parents whose
employers offer coverage for dependents.
Medicaid Transitional Benefits Program
AFDC/TANF recipients are currently provided Medicaid transitional benefits for up to 12 months after their welfare eligibility ends. Under the recently
passed Senate Bill (SB) 97-120, former welfare recipients will be eligible to
extend coverage beyond the initial 12 months through Transition Plus, an
HMO look-alike with more limited benefits than the straight transition program. Premiums and fees will be based on income. Wraparound benefits will
be available as a purchase option under both programs for former AFDC/
TANF recipients whose new jobs provide less generous benefits than
Medicaid. Eligibility and implementation rules for Transition Plus had yet to
be written at the time of the site visit. Enrollment in the new program is slated
to begin on January 1, 1999.
Old Age Pension Program
Begun in 1937, the OAP program is funded solely by the state and is written into its constitution. The program provides cash grants to needy individuals over age 60; it has a high income threshold for participation. The OAP program is funded out of the 2 percent sales tax. Funds remaining after pensions
are paid (the assistance payment portion of OAP) are used to extend the range
of state-financed Medicaid benefits, except long-term care, to noninstitutionalized OAP recipients who do not qualify for federally matched Medicaid coverage. This Health and Medical Care Fund is limited to $10 million. OAP covers
legal immigrants as well as citizens; in fact, a disproportionate number of its
beneficiaries are immigrants.
School-Based Health Care
Under SB 97-101, school districts will be allowed to receive reimbursement
for eligible services provided to Medicaid enrollees. The schools will be encouraged to spend up to 30 percent of the federal matching funds they receive on services for uninsured children. Participation by schools is voluntary.
Colorado Uninsurable Health Insurance Plan
CUHIP is a nonprofit entity that offers health insurance to individuals who
have been denied affordable coverage because of preexisting medical conditions. Established by the Colorado state legislature, CUHIP receives supplemental funding from the state. To further cover the costs of the program, persons insured under CUHIP pay premiums higher than those paid for standard
health insurance.
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Insurance Reforms
Colorado implemented substantial reforms of its small-group market on
January 1, 1995, pursuant to a 1994 law that the legislature hoped would reduce
costs and expand access to health insurance for small employers. The key provisions were guaranteed issue, guaranteed renewal, limits on preexisting condition exclusions, and modified community rating. The overall intent of the law
was to make it more difficult for insurers to refuse to sell to any particular
employment-based group and to increase pooling of health risks. The law
applies to all health insurance products—indemnity and managed care alike—
sold to firms with 1 to 50 employees. (Colorado law requires that “business
groups of one”—defined as proprietors, the self-employed, or a sole employee,
including household employees (nannies and domestics)—be permitted to purchase health insurance in the small-group market.) The law also applies to all
insurers—indemnity carriers, HMOs, and Blue Cross/Blue Shield—and is
enforced by the Department of Insurance, which has oversight authority on all
three types of insurers. The commissioner of insurance is appointed by the governor and confirmed by the state senate.
Guaranteed issue in Colorado means that insurers must offer at least two
products—standard and basic, which differ mostly in their cost-sharing provisions—to all small groups that seek health insurance. As of July 1, 1997, this
provision was superseded by the federal Health Insurance Portability and
Accountability Act of 1996 (HIPAA), which requires guaranteed issue for all
products sold to small groups in all states.
Guaranteed renewal, as legislated by Colorado and required by HIPAA,
means that an insurer must offer to continue coverage of a currently insured
group—that is, the policy cannot be summarily canceled because of claims
experience or a change in the health status of the group members. Insurers can
increase the premium charged at renewal, however.
Colorado limits exclusions from coverage of preexisting conditions to six
months (the waiting period), and then only for conditions that were treated or
the subject of a medical consultation in the six months before coverage began
(the look-back period). This provision is more generous to consumers than the
preexisting condition restriction in the federal HIPAA, which requires states to
have at most a 12-month waiting period. Like HIPAA, Colorado has a creditfor-prior-coverage provision, which means that continuous time spent covered
under one’s previous plan must count toward preexisting condition exclusions
imposed in any new plan. Thus, Colorado has already provided for group-togroup portability.
Pure community rating would entail charging all insured persons the same
premium for the same benefit package. Most states use modified community rating (i.e., they allow specific and limited deviations from identical pricing).
Colorado phased in its modified community rating approach slowly, allowing
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variation of ±20 percent in 1995 and 1996 and ±10 percent in 1997 and beyond.
These rate bands are relatively tight compared with those in the 46 other states
that have adopted premium controls of some kind in the past six years.
Colorado also restricts the different factors that insurers may use to vary (rate)
groups’ premiums to age, family size, and geographic region.
Like most states, Colorado has taken fewer steps to reform the individual
health insurance market. Before HIPAA’s implementation in 1998, the only substantive reform was a guaranteed renewal provision that was passed in 1996
with an effective date of January 1, 1997. Yet Colorado law does provide that all
premiums for individual policies must be increased at the same annual rate.
This provision protects bad risks somewhat and prevents durational or tiered
rating, a technique used for decades by indemnity insurers nationwide. Most
small groups and individuals, if underwritten carefully and risk-selected in
the first place, as most were before states passed reform laws, are likely to have
deteriorating health status and claims experience over time. Durational rating
increases the premiums of the long-insured to encourage them to seek other
insurers, on the theory that if insurers did not do this, they would have to cover
the health expenses of the inevitable “bad” year. In 1997 Colorado also began
permitting “business groups of one,” defined above, to purchase insurance in
the individual market if they preferred this to the small-group market. Some
people wanted this privilege to avoid benefit mandates that Colorado has
imposed on the small-group market and to obtain favorable (experience-rated)
rates. Agents in Colorado also receive much larger commissions for individual
market policies than for “business groups of one” policies, so they encourage
their clients to buy through the individual market as well.
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Financing and Delivery System
L
ike most of the rest of the country, Colorado is experiencing a wide
range of changes in the health care market that are altering the nature
of financing and delivery of care. Changes in both the public and the
private insurance markets, in particular, are continuing to have important effects on the health care delivery system.
Changes in the Health Care Market and Their Impact on
Access for Low-Income Populations
In part because of its insurance reform efforts, Colorado has achieved one of
the highest percentages of nonelderly population covered by private, employersponsored insurance in the nation—72.2 percent in 1994–95 (table 1). Private
insurance coverage, and how the state has regulated the insurance market, is
very important for the low-income population. While the insurance market is
very competitive and works smoothly, two unresolved issues are of particular
note. First, the largest insurer in the state, Blue Cross/Blue Shield of Colorado, is
converting to for-profit status, and proceeds from the sale of the health plan
will help create a nonprofit foundation to serve the health needs of Colorado’s
citizens. The second issue relates to the mandating of mental health parity.
In response to Blue Cross/Blue Shield of Colorado’s decision to convert to
for-profit status, the legislature passed Senate Bill 100 in 1996, specifying the
conversion process for health plans and giving the commissioner of insurance
final power to approve a conversion plan. In addition to two rounds of public
hearings—one round on the structure and governance of the new nonprofit
foundation and the second on the fair market value of the health plan’s assets to
be transferred to the new nonprofit foundation—the bill requires the foundation
to serve the health needs of Colorado’s citizens.
In the Blue Cross/Blue Shield case, the first round of hearings was completed
in September 1997, and the second round was to be completed early in 1998.
There is considerable political support for the foundation to focus on children’s
health insurance coverage, but no final decision has been made. Controversy is
expected about what the fair market value is and how much should be transferred how fast to the new foundation. The commissioner of insurance is
expected to make a decision on the Blue Cross/Blue Shield conversion by mid1998. A companion bill giving the attorney general the same kind of responsibilities and power over nonprofit hospital conversions was defeated in 1997
but was enacted in a different form in the 1998 legislative session.
Another issue in Colorado’s insurance market for the near future concerns
mental health parity. A 1997 law added full parity (prohibition of differential
limits for mental and physical health care services) for eight biologically based
mental conditions. Colorado had previously mandated 45 mental health inpatient days and $1,000 for mental health outpatient visits at no more than a
50 percent copayment. The move to parity, plus the continued narrowing of rate
bands in the small-group market, could reverse some of the favorable premium
experiences of the past few years. Still, with the competitive environment being
what it is—80 carriers and 21 HMOs in total (seven are new as of 1997, and four
of these are provider-sponsored)—other efficiencies will be aggressively sought
to pay for the increased mental health benefits for the employed population and
its dependents without significant premium increases, at least in the short run.
Potentially much more costly than mental health parity, point-of-service products are offered by about half of the HMOs voluntarily, mostly because employers in the marketplace demand it.
The Colorado Health Care Market
Informed estimates are that as much as 80 percent of the privately insured
market in Colorado is enrolled in either HMOs or preferred provider organizations (PPOs). As elsewhere, this situation has put considerable pressure on
providers, especially hospitals, to reduce prices and become more efficient.
The Hospital Market
Mergers and joint ventures to reduce redundancies and to achieve
economies of scale in purchasing, administration, and even patient care are
commonly employed tools of efficiency that have been used in Colorado. Local
hospitals that fear for their survival have merged with national hospital systems
to take advantage of volume purchasing and reductions in administrative costs.
Six major hospital systems own numerous hospitals in Colorado: Columbia/
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HCA; HealthONE; Sisters of Charity of Leavenworth, Kansas; Sisters of Charity
Health Care Systems of Cincinnati, Ohio; PorterCare; and Lutheran Health
Systems. All have paired off to form joint ventures for their Colorado hospitals,
so there are really only three independent hospital systems in Colorado:
Columbia/HealthONE, Centura (PorterCare and Sisters of Charity, Cincinnati),
and Exempla (Lutheran and Sisters of Charity, Leavenworth).7 Health care entities in general are becoming more integrated, as physician groups and hospitals
form networks and enter into joint purchasing and service provision agreements.
Competition in the Health Insurance Market
The Colorado Department of Insurance facilitates competition in health
insurance markets by preparing and releasing a report each year on premium
rates charged by all small-group insurers in the Denver area for six standardized plans (standard and basic for indemnity, HMOs, and PPOs). The first
report was published in April 1995, three months after the small-group reform
law was implemented. That year, variations across companies for identical
products were as large as 350 percent for indemnity insurers and 180 percent
for HMOs. By 1997, the largest variation had increased to 380 percent for
indemnity and 220 percent for HMOs, but average HMO premiums fell each
year (3.4 percent between 1995 and 1996 and 4.6 percent between 1996 and
1997), while average PPO and indemnity premiums increased only 4.2 percent
and 6.5 percent per year, respectively. This experience is much better than
has been observed nationally in the small-group market. Thus, it is reasonable to infer that the Colorado small-group insurance market is performing
the way a highly competitive market is expected to perform. The widening
absolute range in premiums probably reflects adverse selection in the “losing” plans, and more than likely the highest cost plans will continue to lose
market share.
As further evidence of Colorado’s competitive health plan market, the leading
small-group player in 1993, Kaiser, saw its 12.8 percent market share decline to
8.7 percent by 1996 despite a 2.4 percent drop in premiums. In 1997, only five
insurers had more than 5 percent of the small-group market, and the largest
(Employer’s Health) had only 13 percent. It is too early to tell which managed
care companies will dominate Colorado’s health plan market in the future, but it
appears that competition will be vibrant at least in the near term. Among
Colorado’s insurance market observers, small-group reforms are given high marks
for making the fruits of this health plan competition available to small employers.
Regulation of Managed Care Plans
Colorado has no substantial any-willing-provider laws, but there was significant political activity to protect pharmacists in the 1997 legislative session. Managed care in Colorado has matured and been accepted generally,
especially among employers. The anti-managed care “backlash” seen elsewhere takes the form in Colorado not of trying to erase HMOs but of adopting a watchful, waiting approach.
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Adequacy of Medicaid Hospital and Physician Reimbursement and Disproportionate Share Hospital Payments
Medicaid provider payment is not a divisive issue in Colorado because
both hospitals and physicians, in general, consider payment rates to be adequate. The state’s DSH program has generated comparatively more charged discussion and debate.
Hospital Payment
Colorado implemented a prospective payment system based on diagnosisrelated groups (DRGs) for Medicaid hospital inpatient services in the late 1980s.
In 1990, the state lost a lawsuit brought by hospitals under the Boren amendment, which requires reimbursement sufficient to cover the full cost of an economically and efficiently operated facility. As a result, the state not only raised
payment levels but also switched from a generic DRG system to a payment system based on Colorado hospital data. Although these changes in the payment
system were expected to create some big winners and losers, hospitals generally
have not expressed concern regarding rates.
Data from the American Hospital Association indicate that Medicaid hospital reimbursement rates as a percentage of hospitals’ costs have increased
considerably in Colorado, from 67 percent in 1989 to 89 percent in 1993.
Consequently, although still below the national average of 93 percent, hospital
payment rates are considered adequate, and no new Boren amendment suits
have been brought against the state. Before the Boren amendment was repealed
by the Balanced Budget Act of 1997, state officials predicted that a repeal would
not affect the level at which they set payment rates. They noted that overall payments to hospitals have already declined in recent years in Colorado (even
though payments have grown as a percentage of costs).
Physician Reimbursement
Although the state is attempting to move a significant number of Medicaid
enrollees into capitated managed care plans, 75 percent of enrollees’ physician services are still reimbursed on a fee-for-service basis. The state uses the
Medicare relative-value scale system to reimburse physicians for evaluation
and management services and has developed its own fee schedule for the
remaining services. As of 1993, relative to the rest of the nation, the Medicaid
program in Colorado paid roughly average rates.8 Since that time, the state
increased reimbursement rates for both primary care and obstetrical services by
51 percent and 33 percent, respectively.
State Charity Care Reimbursement
Colorado has two main programs that reimburse community and teaching hospitals and community clinics for services provided to the uninsured—
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the Colorado Indigent Care Program and the Medicaid DSH program. Both
programs are funded largely through intergovernmental transfers (IGTs).
There are four categories of CICP recipients: Denver Health and Hospital
Authority (DHH); University Hospital; specialty hospitals; and hospitals and
clinics outside the Denver area. CICP providers received approximately
$34 million in CICP reimbursements in 1996. With two exceptions, all funds are
federally matched DSH dollars generated through the IGT program. State general revenues are used to generate the federal match for the University Hospital
program and to fund the outstate clinics. Because the state keeps some of the
revenue associated with the DSH program, some of those funds can be used to
finance the outstate clinic component of CICP.
Four groups of hospitals receive DSH as well as CICP reimbursement: hospitals that provide “bona fide” contributions to the state to obtain federal matching funds; a number of specialty hospitals across the state; DHH; and University
Hospital. These hospitals received roughly $36 million in DSH payments, net
of IGTs, in FY 1996-97. DHH was the largest recipient of funds (almost 55 percent
of the total), followed by University Hospital (37 percent).
The DSH program has also been a significant source of revenue for the
state. Between FY 1993-94 and FY 1996-97, the state retained approximately
$150 million of the $361 million in federal matching funds generated through
the DSH program.
Despite the fact that Colorado is classified as a high DSH state, with an
allotment of more than $300 million per year, it does not spend up to its limit.
(The limit is high in part because of a large, one-time DSH expenditure in
the year the limit was set.) Under present policy, the state cannot fund hospitals using all available DSH funds because of TABOR limits—IGTs count as
state revenue, which is capped under TABOR. In the 1997 legislative session, DHH and University Hospital were actively involved in attempting to
change the state method for generating DSH monies. The federal government
approved a certification-of-uncompensated-expense proposal, which did not
require a transfer of funds intergovernmentally, thus bypassing TABOR limits.
The net benefit to DHH and University Hospital reportedly would have been
several million dollars, and other DSH hospitals would have benefited as
well. The proposal never went very far in the legislature, however, for two primary reasons. First, some hospitals are not government owned, so any change
in the state DSH program would have increased general fund expenditures
needed to generate the federal match for these hospitals (by an estimated
$3 million). Second, in a state with a strong distaste for entitlement programs,
legislators were uncomfortable obtaining more federal money, which might
incite a program “feeding frenzy.” If this money were to dry up in the future,
the state would then have to cut back or make up the difference. Despite the
legislature’s reluctance to draw down additional federal DSH funds, respondents indicated that it may have to revisit the issue when purse strings are
drawn tighter.
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Medicaid Managed Care
The roots of Colorado’s Medicaid managed care program date back to 1974,
when Rocky Mountain HMO began assuming full risk for voluntarily enrolled
Medicaid beneficiaries on the Western Slope (a rural area of the state). Nearly a
decade later, in 1983, the state began operating its Primary Care Physician (PCP)
case management program under a Section 1915(b) freedom of choice waiver—
one of the first such programs in the nation. The PCP program is statewide and
is mandatory for AFDC/TANF and related beneficiaries and SSI recipients,
excluding the dually eligible, foster children, and institutionalized persons.
Participating physicians are paid a monthly case management fee of $4.70 in
addition to fee-for-service payments. If an HMO is available in a recipient’s community, the recipient may opt for HMO enrollment instead of the PCP program.
Enrollment and Participation by Plan
In the early years of the 1915(b) waiver program and until fairly recently, the
majority of eligible recipients participated in the PCP program rather than
enrolling in an HMO. In 1993, 135,000 recipients were in the PCP program and
10,000 were enrolled in Rocky Mountain HMO, accounting, in total, for somewhat more than half of the state’s Medicaid population.9 Two interrelated factors accounted for low HMO enrollment—the lack of a mandate or strong incentives for Medicaid recipients to join an HMO, and insufficient interest by HMOs
in Medicaid. HMOs doubted their ability to attract enough enrollees to spread
risk adequately and thus were not enthusiastic about the Medicaid market.
Rocky Mountain HMO’s sizable membership was the result of a long-standing
custom among physicians on the Western Slope of requiring their Medicaid
patients to join the HMO in order to be seen by them.
PCP and HMO enrollees continued to account for about half of the total
Medicaid population as of mid-1997. What has changed since 1994, however, is
a dramatic shift of recipients from the PCP program into HMOs. As of May
1997, approximately 70,000 recipients were enrolled in five HMOs, and 60,000
remained in the PCP program. Most HMO enrollees are in the Denver metro
area. This transformation occurred nearly “overnight” as a result of increased
participation by HMOs in the Medicaid program. Increased participation was
prompted by at least three factors: (1) speculation that the Clinton health plan
would pass and move most individuals, including Medicaid recipients, into
managed care plans; (2) a perceived opportunity for profits in an inefficient
environment of relatively generous Medicaid hospital payments; and, perhaps
most important, (3) the state’s “rollover” policy, which moved PCP enrollees
into HMOs if their PCP belonged to the network of a Medicaid HMO.
The state initiated the rollover strategy in early 1994. The Medicaid agency
mailed letters to selected enrollees in the PCP program, informing them that
they would be rolled over into their current PCP’s HMO unless they asked to
remain in the PCP program. (Only Medicaid clients whose PCPs belonged to a
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panel of a contracting Medicaid HMO were selected to be rolled over.) With
the exception of disabled individuals, those who opted out of the HMO were
informed they would have to seek another PCP. The rollovers occurred over a
period of months, with one plan after another converting its primary care physicians’ patients to HMO membership.
In December 1995, nearly two years after the first rollover, a new HMO called
Colorado Access was formed by several safety net hospitals and health centers in
Denver and surrounding counties. (The Medicaid HMO of Denver Health and
Hospitals, ChoiceCare, which began enrolling clients in 1994, was subsumed
by Colorado Access. ChoiceCare officially transferred its 20,000 members to the
new HMO in January 1996.) The owners of Colorado Access are Denver Health
and Hospital Authority, University Hospital, Children’s Hospital, and a network of federally qualified health centers (FQHCs). At the beginning of 1996, the
new HMO had 55 percent of the state’s Medicaid HMO enrollees—more than
twice as many as the next leading HMO, Rocky Mountain.
The state’s rollover approach was successful in increasing the number of
capitated Medicaid recipients sevenfold; only a few hundred asked to return
to the PCP program. Yet the conversion process was not without controversy.
Some HMOs considered unfair the large number of recipients who were
enrolled in Colorado Access. The rollover policy was also criticized by groups
representing disabled persons, who had concerns about service limitations of
HMOs and restrictions on choice of providers. Finally, some faulted the implementation of the policy as not being forthright with Medicaid beneficiaries. As
a result of the controversy and subsequent pressure from the legislature,
rollovers were halted.
In 1997, the state resumed rollovers on a limited basis in order to bring more
of the Medicaid population under capitation. The state has produced “friendlier” materials to inform beneficiaries of the conversion process, and it has
suggested that HMOs urge physicians in their networks to initiate the conversion of patients currently in the PCP program. The state also requires that if a
physician joins the network of a Medicaid HMO, all of his or her new Medicaid
patients must also join that HMO or find a new PCP. The intent of this policy
is to eliminate any incentives to keep one’s more expensive patients in the feefor-service PCP program. An exception to the policy was made for the disabled,
who may opt to remain in the PCP program.
Recent Legislation
Senate Bill 97-5, signed into law June 3, 1997, builds on the state’s current
efforts, establishing the goal of 75 percent enrollment of Medicaid clients in
managed care by the year 2000. The effort to expand managed care enrollment
began several years ago when the state legislature, frustrated by rising Medicaid
costs, passed legislation to withdraw from Medicaid. The governor vetoed that
bill. The following year, new legislation established a committee of legislators,
health care practitioners, and others to develop solutions to the rising costs. A
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Medicaid managed care bill that mandated 100 percent enrollment of recipients
was drafted, but it encountered serious opposition and did not pass in the
1995–96 session. Another interim committee, formed in the summer of 1996,
produced SB 97-5.
Less ambitious than its predecessor, SB 97-5 does not require that all
Medicaid recipients enroll in managed care, and it continues the PCP program to
satisfy the demands of advocates for the disabled. However, the Department of
Health Care Policy and Financing plans to strongly encourage enrollment in
HMOs using its current methods. In addition, the state’s preference for HMOs
will be manifested in the autoassignment default algorithm: clients will be given
a choice, but those who do not express a preference will be assigned to an HMO.
Expanded enrollment in HMOs and, more specifically, the associated savings (estimated at 5 percent of fee-for-service expenditures) are essential to the
full implementation of SB 97-5 and other legislation. A large share of the projected savings ($1.9 million) from SB 97-5 in year one will fund an enrollment
broker program to assist in educating Medicaid recipients about managed care
and enrolling them in a health plan. The additional resources are, in part, an
attempt to shore up the enrollment process at the county level, which has been
blamed for shortfalls in managed care participation. (Of those beneficiaries
mandated to enroll in the PCP program, 27 percent remained in traditional feefor-service as of FY 1996.) Some providers in the Colorado Access network are
concerned that the enrollment broker may channel recipients to HMOs less
suited to their needs simply to increase enrollment in private plans. Some
observers expect that an enrollment broker, in addition to serving as a source for
nonbiased information on health plans, may indeed level the playing field
between Colorado Access and commercial plans, some of which believe that
Colorado Access has received favorable treatment from the state. However,
many of the new enrollees will be people currently served by providers who
make up Colorado Access and, thus, will likely select or be assigned to
Colorado Access.
Beginning in year two, savings from SB 97-5 will be allocated primarily to
the Children’s Basic Health Plan, described earlier, with some savings also
directed to grants for “essential community providers” (e.g., community health
centers), which stand to lose financially from the switch to managed care.
SB 97-5 includes another provision to aid essential community providers:
HMOs with Medicaid contracts are required to negotiate in good faith with
these providers to add them to their networks.
HMO Contracting Issues
Capitation Rates
Until FY 1998, HMO capitation rates were set at 95 percent of the average
historical per capita fee-for-service costs for each Medicaid eligibility category.10
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Within AFDC/TANF and related eligibility categories, rates were set separately
for adults and children. Rates were also adjusted to account for paying FQHCs
100 percent of reasonable costs—for those HMOs with FQHCs in their network.
Finally, rates were differentiated by location—the Denver metropolitan area
versus the rest of the state.
As of FY 1998, Colorado’s Medicaid program employs a diagnosis-based riskadjustment system to set capitation rates. In adopting this payment system, the
state became one of the first in the country to adjust Medicaid payments to HMOs
for health status of enrollees. Developed by Richard Kronick and colleagues, the
risk-adjustment system is based on high-cost diagnoses as reported on HMO
encounter data. The diagnoses are used to develop case-mix factors for AFDCrelated children, AFDC-related adults, and disabled persons—for each HMO.
Case-mix factors are multiplied by the base payment rate (derived from fee-forservice costs, adjusted for diagnoses as well) to derive capitation payments for
each HMO.11 (Geographic and FQHC adjustments continue to be made.)
Although HMOs generally appear satisfied with capitation rates, Rocky
Mountain HMO is an exception. In May 1997, it canceled its contract with
Medicaid for four of the counties it serves on the Western Slope because of the
losses it experienced under the program. The HMO lost $1.2 million in 1996
and $600,000 in 1995 serving 1,100 Medicaid recipients. Rocky Mountain
explained that the cost of health care in these counties, which include ski resort
towns, is very high, and Medicaid rates do not take this fact into account.12
Currently, any HMO may participate in Medicaid if it meets the requirements of the contract. By January 1999, the state plans to institute competitive
bidding for contracts. HMOs fear that competitive bidding may lead to lower
rates. Colorado Access, which is thriving financially at present, is concerned
that competitive bidding could force it to reduce payments to safety net
providers. Such cutbacks could have serious consequences for some providers
in its network, especially University Hospital because of its relatively costly
teaching and research functions. Moreover, Colorado Access could have problems competing successfully while maintaining its providers’ commitment to
serve the uninsured.
Quality Standards
In its 1997 contract with HMOs, the state substantially increased and
enhanced its quality requirements. Up to that point, HMO regulations enforced
by the Department of Public Health and Environment were limited and, having been established 20 years ago, very dated. The current contract includes
standards for provider network adequacy, quality assurance, and grievance procedures. The Department of Health Care Policy and Financing “will ensure
compliance with these standards through annual HMO evaluations, tracking
of complaints and grievances, customer satisfaction surveys, and focused studies of particular clinical and service delivery topics.”13 Health Plan Employer
Data and Information Set (HEDIS) reporting will also be required.
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Managed Care for the Mentally Ill and Elderly Populations
In most Colorado counties, Medicaid recipients who receive mental health
services do so through a carve-out program, in which mental health services are
administered and paid for separately from other health benefits. (In Denver,
however, beginning June 1, 1998, mental and physical health services will be
covered under a single managed care contract awarded to Colorado Access.)
As of May 1997, 69 percent of the Medicaid population (51 of 63 counties) was
served by the Mental Health Capitation Pilot Program. The program, begun in
1995, is run through seven contractors, or Mental Health Assessment and
Service Agencies (MHASAs), which are chosen in a competitive bid process.
Every Medicaid enrollee in the service area of a particular MHASA receives all
mental health services through that MHASA. Most community mental health
centers serve as MHASAs, a few in partnership with a for-profit managed mental health care company. Statewide expansion of the program was slated for
completion in June 1998.
In FY 1995-96, the state required bids at a level no higher than 95 percent
of anticipated total payments (for all beneficiaries, regardless of mental health
status) under a fee-for-service system. The bids came in even lower—91.5 percent of the anticipated total, for a projected savings of $6.5 million.14 A unique
feature of the program is the requirement that nonprofit MHASAs reinvest any
revenues over expenses in services for non-Medicaid, indigent clients; for-profit
MHASAs are held to no more than a 5 percent profit.15
Some controversy surrounds the program, particularly in the area of psychiatric hospital services. In counties where the program was instituted, inpatient expenditures fell 66 percent from FY 1994-95 to FY 1995-96.16 Although
advocates have historically sought a reduction in use of institutions, they worry
that this change was achieved through a decrease in the quality of care and
availability of services. They also contend that proper oversight has been lacking. The state has been working to resolve these concerns and has established
a performance indicator system and a high-profile grievance system.
The state’s major experiment with managed care for the elderly rests with a
demonstration in Mesa County, the Integrated Long-Term Care and Financing
Project. The project represents an effort to combine Medicaid and state-funded
long-term care services with Medicare-funded services, resulting in coordination of both acute and long-term care services under one plan. The plan, Rocky
Mountain HMO, will enroll dual eligibles on a voluntary basis. The goal is to
achieve savings by eliminating the incentive to shift patients to various settings depending on who will pay for the service. The Section 1115 waiver
needed to implement this program, the second such waiver granted in the
nation, was approved by the federal government in August 1997.
38
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
Delivering Health Care
to the Uninsured
and Low-Income Populations
C
olorado has a relatively strong safety net of hospitals and clinics, supported in part by the Colorado Indigent Care Program and DSH programs. The state’s public health system also meets some of the important health care needs of the uninsured. The role of public health
departments in the safety net is discussed below, followed by a description of
the health care delivery system for low-income residents of the Denver area.
The Role of the Public Health System
In addition to the broader public health responsibilities they hold, local health
departments are an essential component of the safety net in many Colorado counties. Local health units are the delivery arm of the state’s public health system;
they include 14 “organized” health departments and 39 county nursing units.
County nursing units are established in rural counties that can support only a
limited staff—often one public health nurse. Local health units of all sizes have
commonly provided well-child care, prenatal care, and services for children with
special health needs, including enhanced services such as case management. In
the early 1990s, many local health departments began to bill Medicaid for these
services; consequently, Medicaid grew as a share of health department revenues.
The most important revenue source appears to be local taxes, which comprised
approximately half of local health unit funding in the early 1990s.17
Colorado’s public health system, like those in many other states, is changing
as Medicaid managed care expands. Some health departments have witnessed
declines in their Medicaid revenues because former patients are now linked with
private primary care physicians under managed care arrangements. Partly in
response to these changes, the state Office of Health has promoted a return to core
public health services, including prevention; yet it recognizes that in some counties, local health units remain critical providers of an array of primary care services for women and children, particularly those who are uninsured. In six counties, for example, the only provider within their boundaries is a public health nurse.
Some health departments view the changes in the Medicaid program as an
opportunity to focus more on enhanced services for women and children (e.g.,
counseling, transportation) rather than delivery of medical services, although
securing funds for such services poses a challenge. Health departments in
Boulder and the Tri-County area, which borders Denver, are examples of agencies that welcome the change and have taken steps to refocus their activities.
However, when the Tri-County health department attempted to scale back its
delivery of prenatal and well-child services, it soon had to resume them because
University Hospital closed its clinics in the health department’s jurisdiction,
leaving many without a source of medical care. In rural areas where the Primary
Care Physician program more commonly enrolls Medicaid beneficiaries than
do HMOs, change is also evident. Public health nurses have increasingly
referred patients to a PCP rather than provide the care themselves.
Because some local health departments still play a role in the provision of
medical services, the Office of Health is working with them to establish relationships with HMOs. In general, local health units have had difficulty obtaining
contracts with HMOs because they do not have physicians on staff or offer comprehensive primary care services. However, some HMOs are approaching local
health units, and, in at least one county, an HMO is now contracting with the local
health unit for home visits by nurses. (Health departments are considered “essential community providers” with whom HMOs must make good-faith efforts to contract.) The Office of Health has also worked with state Medicaid staff to encourage the inclusion of public health priorities in the HMO contract. It counts as
successes the requirement for HEDIS reporting, the coverage of certain prevention services, and the designation of school-based clinics as Medicaid providers.
Impact of Government Policies and Market Changes on
Safety Net Providers in Denver
The health care market in Denver is highly competitive among both hospitals and health plans. At the beginning of the decade there were 20 indepen-
40
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
dent hospitals in the Denver metropolitan area—all private, voluntary institutions. Since then, most of these hospitals have either closed or become part of
one of the three hospital systems in the area. Observers feel that more closings are likely.18
The managed care market in Denver is also very active. There are 20 HMOs
currently licensed to do business in the state, and other insurers, such as Aetna,
are actively seeking to develop an HMO product for Colorado. Of the 20 HMOs,
6—including Colorado Access—currently have contracts under Medicaid.
Competition among Medicaid plans is relatively moderate, but legislation
passed in 1997 (SB 97-5) may change this situation as it expands the number
of Medicaid eligibles enrolled in managed care.
The main source of care for the medically indigent in the Denver metropolitan area is Denver Health and Hospital Authority, a publicly funded system
(which operates independently of the city and county) that links Denver Health
Medical Center (DHMC) and 10 FQHCs. In 1995, DHH provided approximately
50 percent of the charity care in the Denver metropolitan area.19 Other important safety net hospitals in the metropolitan area are University Hospital
(30 percent of the area’s charity care) and Children’s Hospital (3 percent).
DHMC serves the indigent of the city of Denver. University Hospital serves the
indigent of the Denver suburbs and functions as the specialty referral center
for the DHH clinics. Children’s Hospital provides children’s specialty services
for both DHH and University Hospital. Trauma services are consolidated at
DHMC.
Ambulatory care for medically indigent persons in the Denver area is provided largely by DHH clinics. These clinics also provide some of the services
typically delivered by local health departments, including immunizations and
screening. (Like other counties in the state, Denver’s local health department
has shifted its focus toward the provision of core public health functions such
as environmental health and disease control. The local health department is
located on the DHH campus.) A number of nonprofit community clinics also
provide care for the low-income population in the Denver area. The largest of
these nonprofit clinics are Clínica Campesina, Salud Family Health Centers,
and the Metropolitan Denver Provider Network.
The safety net overall is faring well in Denver as a result of six years of
unprecedented growth in the economy; the state’s lower-than-average rate of
uninsurance, which lessens providers’ uncompensated care burden; and the
safety net’s enviable position in the Medicaid managed care market through
Colorado Access. Nevertheless, the safety net’s financial stability may be
somewhat tenuous. Recent changes in the local health care market and state
policy decisions have significantly raised the level of concern among safety
net providers. First, respondents indicated that the number of uninsured and
underinsured persons in Colorado was rising as a result of changes in the
local economy. While Denver’s economy is strong, many of the new jobs that
have been created are in the small business sector or are part-time and do
not include health insurance benefits. If economic growth slows and the
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
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41
uninsured rate continues to increase, the safety net will be at risk, given the
state’s limited Medicaid program.
Second, uncertainties about state Medicaid policy have contributed to unease
among safety net providers. Most safety net providers believe that SB 97-5, the
1997 legislation to increase Medicaid HMO enrollment, has the potential to
undermine their relatively stable position, depending on how the legislation is
implemented. As more HMOs enter the capitated managed care market, issues
such as the allocation of default assignments to HMOs other than Colorado
Access, the level of capitated rates if competitive bidding is introduced, and
competition for patients will become very important. Increased competition is
likely to put a strain on the safety net generally, and specifically on the coalition
of providers that created Colorado Access, as potentially divisive issues such as
cost control and allocation of members among the institutions emerge.
Increasing competitive pressure has forced safety net institutions to develop
a number of survival strategies. The establishment of Colorado Access is a key
example of how safety net providers have made a concerted effort to position
themselves in a competitive market. DHH’s integration of the primary care system with the hospital has allowed it not only to track patients but also to monitor and evaluate physician clinical practices and outcomes, so that changes can
be made in physician behavior to increase efficiency.
Safety net hospitals and clinics are also developing initiatives designed to
bring in additional revenues. DHH has developed special managed care products (including an HMO designed to capture the middle-income minority population, a Medicare managed care initiative, and health care for prisoners), as
well as programs designed to capture particular markets, such as a substance
abuse clinic for the state and sexually transmitted disease and AIDS home care
programs. Moreover, one community clinic was attempting to generate more
third-party billing by attracting additional commercially insured patients.
Another clinic has taken the approach of marketing to families with the offer
of continuity of care no matter what their current or future eligibility may be,
hoping to gain their loyalty so that they will remain patients of the clinic when
they are insured.
42
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
Long-Term Care
for the Elderly and
Persons with Disabilities
Background
I
n contrast to the attention focused on children, long-term care issues are not
a major problem in Colorado, for a number of reasons. First, the state has a
substantially smaller share of its population over age 65 (8.5 percent) than
the United States as a whole (12.1 percent). In addition, most of the elements of its public long-term care system have been in place for some time,
and state officials generally express satisfaction with the system. It is somewhat
surprising that long-term care has not captured more attention, however, given
that for FY 1997-98 the state was projecting a 13.8 percent increase in Medicaid
long-term care costs compared with a 6.3 percent increase in acute care services.20 Passage of a major payment system change for nursing home care did
focus on reducing costs in 1997.
Spending
In Colorado as in other states, Medicaid is by far the largest source of public financing for long-term care for the elderly and disabled. In 1995, the state
spent a total of $491 million on long-term care for these groups, or 31 percent of
the entire Medicaid budget (table 6). Long-term care expenditures increased
by 15.9 percent between 1990 and 1992 and by 9.1 percent between 1992 and
1995, slightly above the national average for both periods. Spending growth has
been most dramatic in the area of home care. In 1990, 37 percent of long-term
44
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
$281.7
$141.3
132.3
9.0
$130.1
82.0
48.0
$10.4
$378.2
$195.2
182.7
12.5
$168.1
101.7
66.4
$14.8
1992
$490.8
$266.2
241.9
24.3
$203.6
74.3
129.3
$20.9
1995
15.9%
17.5%
17.5%
17.6%
13.7%
11.3%
17.6%
19.7%
1990–92
9.1%
10.9%
9.8%
24.9%
6.6%
–9.9%
24.9%
12.1%
1992–95
Average Annual Growth
United States
1990
$42,542.5
$24,846.4
22,280.8
2,565.6
$16,201.0
13,030.5
3,170.5
$1,495.1
1992
$53,996.1
$30,413.7
27,294.6
3,119.1
$21,618.7
15,015.7
6,603.0
$1,963.7
1995
Long-Term Care Expenditures
$32,264.2
$18,408.9
16,453.2
1,955.7
$12,842.4
10,860.5
1,982.0
$1,012.9
Source: The Urban Institute, 1997. Based on HCFA 2082 and HCFA 64 data.
* Includes nursing home care, intermediate care facilities for the mentally retarded, and mental health services.
Total
Elderly
Institutional Care*
Home Care
Blind and Disabled
Institutional Care*
Home Care
Adults and Children
1990
Long-Term Care Expenditures
Colorado
Table 6 Medicaid Long-Term Care Expenditures by Eligibility Group, Colorado and United States ($ in Millions)
14.8%
16.2%
16.4%
14.5%
12.3%
12.0%
26.5%
21.5%
1990–92
8.3%
7.0%
7.0%
6.7%
10.1%
6.6%
27.7%
9.5%
1992–95
Average Annual Growth
care expenditures on the disabled were for home care; the figure had risen to
64 percent five years later. For the elderly, the proportion of long-term care
that is home care is small, but it also rose during the 1990–1995 period, from 6
percent to 9 percent.
Overview of Services
Expansion of home health services in Colorado has largely come through
Medicaid home and community-based services (HCBS) waivers. The state has
at least six waivers in place, each targeted at a distinct category of disabled
persons. HCBS waivers for developmentally disabled and mentally ill populations are administered through the Department of Human Services; the waiver
for the elderly, blind, and disabled is administered by the Department of Health
Care Policy and Financing. The small number of enrollees per waiver and separate administrative structures reportedly create large administrative burdens.
Further, the waiver approval process was described by one state official as
“long, arduous, time-consuming.”
Institutional care, particularly nursing home care, still accounts for the
majority of long-term care spending in Colorado. An estimate of the number of
Medicaid nursing home recipients was 10,620 in 1996,21 whereas the number of
participants in the HCBS waiver for the elderly, blind, and disabled population was estimated to be about half this number—between 5,200 and 6,000.
(Other state programs, as described below, would increase the number of persons served in the community above the number of nursing home residents.)
The rate of growth in nursing home beds has been very modest. Since 1980,
the number of nursing home beds has increased only 11.7 percent, compared
with 33.5 percent nationally.22 Nursing home beds are at about the same level of
availability in Colorado as for the country as a whole (55 per 1,000 elderly in
Colorado compared with the United States average of 53). Occupancy rates
averaged 89 percent in 1993, which was lower than the national average of
95 percent.23
Significant public monies also support institutional care for those with mental illnesses or developmental disabilities. The state operates two mental hospitals, whose combined bed count has declined to less than 1,000 since the
beginning of the decade. In contrast, 57,000 persons with mental illness were
served in publicly supported community programs in FY 1995-96. The state
also runs several facilities for persons with developmental disabilities.
Facilities include Intermediate Care Facilities for the Mentally Retarded
(ICFs/MR) and group homes; they range in size from more than 100 residents
to fewer than 6. There are also numerous private residential care settings,
including two private ICFs/MR.
The state operates two additional long-term care programs, using only state
funds. The first of these programs is the Home Care Allowance, which provides a cash grant to families, giving them the flexibility to purchase needed services to maintain a disabled family member in the home. In 1996, 5,796 perTHE URBAN
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HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
45
sons, most of whom were nonelderly, were served by this program. In addition, the state has a small Adult Foster Care program that provides 24-hour
(nonmedical) supervised residential care. The program served just 537 persons in 1996.24
Finally, the Older Americans Act (OAA) provides meals and transportation
to supplement the resources of many frail, elderly individuals who remain at
home. The Department of Human Services annual report shows that 137,537
Coloradans received OAA services in 1996.
Long-Term Care for the Elderly
Colorado has undertaken a number of efforts to contain public spending on
long-term care services for the elderly and improve the coordination and quality of care. Strategies range from managed care to reduced nursing home payment rates. The state has been somewhat less aggressive in seeking new sources
of long-term care financing.
Medicare Maximization and Efforts to Attract More
Private-Sector Resources
While several state officials expressed a desire to use resources other than
Medicaid for funding long-term care, there seems to be little emphasis on such
initiatives. For example, no conscientious effort to exploit Medicare’s resources
seems to be under way. Moreover, encouraging long-term care insurance is
viewed favorably but not as a likely means for saving Medicaid dollars. Some
officials suggested that there may be little relationship between those who buy
private insurance and Medicaid, particularly because Colorado does not have
a medically needy program.
In contrast, the state has been increasingly active in estate recovery under
Medicaid. In FY 1996, $2 million was recovered from estates and liens on property of current nursing home residents, up 125 percent from the 1995 level.25
New regulations were implemented in 1996 around life estates and annuities to
close Medicaid loopholes allowing the transfer of assets. In addition, some
resources have begun to be recovered from the income trusts that have been
set up to provide a mechanism for individuals to pay a portion of their nursing
home costs. The state is the beneficiary of trust monies that remain when the
trust closes. In FY 1996, $648,821 was recovered.
Delivery System Changes
Colorado views its HCBS programs as highly successful, largely as a costsaving device. A recent analysis of the state’s waiver programs concluded that
they saved $53 million in 1994—an amount equal to 17 percent of the projected
total Medicaid long-term care budget.26
46
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
As discussed earlier, the state is also experimenting with integrating acute
and long-term care services for the dually eligible population. The Integrated
Long-Term Care and Financing Project in Mesa County represents an attempt
to add Medicaid and state-funded long-term care services to the package of
services offered by Medicare HMOs to achieve a coordinated set of services.
This program is in the early stages of operation. The state also has two Program
for All-Inclusive Care for the Elderly sites.
Colorado has a single-entry-point system for qualification for all long-term
care services both under Medicaid and state-only programs, sometimes referred
to as Options for Long-Term Care. The system is overseen by the Aging and
Adult Services unit of the Department of Human Services, which coordinates
the activities of 25 geographically distributed agencies across Colorado. The
single-entry system offers a comprehensive means for intake, assessment of
clients, referrals, case management, resource development, and planning. The
system enables the state to closely manage the care of recipients to ensure that
it is appropriate and to control spending. Under the single-entry system,
Medicaid recipients who pass the screens for nursing home services must pass
yet another, more rigorous, screen to qualify for the HCBS waiver program. This
dual screen is a conscious attempt by the state to limit the number of participants in HCBS.
Traditional Efforts to Control Expenditures
Much of the effort by Colorado to control Medicaid long-term care costs falls
within the realm of traditional approaches. The lack of a medically needy program, strict standards for overall eligibility for long-term care services, and careful attention to payment levels are key components of the state’s efforts to contain costs. Since 1990, the state also has had in place a Medicaid nursing home
bed moratorium. (The moratorium has not been absolute; when there are special needs, such as geographic shortages, new beds have been allowed.)
Medicaid pays nursing homes using a facility-specific prospective rate. In
1995, the per diem nursing home rate was $78, compared with a United States
average of $85.27 Senate Bill (SB) 97-42 authorizes moving to a case-mix payment system and makes a number of other changes expected to result in savings
over the current system. In addition, overall growth in payment rates will be
constrained to no more than 6 percent for administrative costs and 8 percent for
services each year. Officials expressed confidence in holding the line on nursing home payment levels, believing that the quality of care will not suffer.
Advocates are less certain, particularly with the repeal of the Boren amendment. An April budget analysis of SB 97-42 suggested that it would save
$15.7 million in FY 1998.28
The state has kept payment levels for HCBS programs well below nursing
home rates so that when combined with stringent eligibility requirements, program supporters assert, HCBS programs save substantial amounts of money for
the Medicaid program. Reimbursement rates for home health care are on a flatTHE URBAN
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47
rate fee schedule and vary from $32 for a home health aide visit to $61 for a visit
by a registered nurse.
Long-Term Care for Persons with Mental Illness and
Developmental Disabilities
A strong tradition of community-based care and local control, as well as a
recent focus on managed care, define the financing and service delivery system for persons with mental and developmental disabilities in Colorado.
Waiver programs have been an important part of the state’s effort to influence
the delivery of the services for these populations.
Mental Health
The most significant undertaking in Colorado’s public mental health system in recent years is the Medicaid Mental Health Capitation pilot project. In
counties where the pilot is operating, inpatient services comprised less than
20 percent of mental health spending in FY 1995-96, compared with 50 percent in the previous year.29 Continued downsizing of state psychiatric hospitals is expected, particularly when the capitation project is expanded
statewide in 1998. Some advocates have raised concerns about the pace of
change and whether the Medicaid population as well as the uninsured population are receiving adequate services. A specific concern is that mentally ill
persons are being admitted inappropriately to correctional centers. To address
these issues, the state has introduced measures such as greater oversight, a
feature in the capitated program that directs Medicaid savings to the uninsured, and programs to reduce the large number of mentally ill persons in
jails and juvenile correctional centers.
Services for Medicaid-eligible mentally ill persons are also available under
an HCBS mental health waiver. Enrollment has been low; after three years in
existence, the program serves only 200 persons.
Developmental Disabilities Services
Medicaid HCBS waivers are the cornerstone of Colorado’s strategy to deliver
services to the developmentally disabled population and account for about
half of public spending on developmental disability services. As of June 1996,
of the 8,774 persons with developmental disabilities served in the community,
two-thirds received services under a Medicaid waiver. Medicaid in total comprised 62 percent of the entire developmental disabilities budget in 1995, up
from 49 percent in 1992. During the same period, state general fund support fell
from 26 percent to 20 percent.30
48
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
One-third of those served in the community, including many waiver participants, receive residential care. Residential care settings in Colorado are
typically small. Of the developmentally disabled persons in residential settings in 1994, 73 percent were in facilities with fewer than six beds, compared
with 47 percent nationally.31 Residential services were 45 percent of developmental disabilities expenditures in 1995.
The move to community-based care came early and was pursued aggressively in Colorado. The main waiver program is the developmentally disabled
waiver, which began in 1983 and provides comprehensive residential habilitation services. This waiver is capped at approximately 3,400 persons and currently has a waiting list of 1,300 persons who are receiving no waiver services
and 1,700 persons who are receiving services under another waiver but need
more or different services. The legislature has not approved expansion of the
program, primarily because the average per participant expenditure is $30,000
per year. The supported living services waiver is a much smaller program in
terms of size (700 to 800 persons), expense per person (about $10,000), and
services offered (no residential services). Many persons who are on the waiting list for the developmentally disabled waiver are currently being served
through this less comprehensive waiver program. Another related home and
community-based program is the Model 200 (Katie Beckett) program, which
serves 400 severely disabled children from higher-income families.
The elderly, blind, and disabled waiver has only recently been open to the
developmentally disabled population as a result of the June 1996 ruling in
King v. Weil, which challenged the state’s waiver eligibility structure as a violation of the Americans with Disabilities Act. The lawsuit was brought because
expansion of the developmentally disabled waiver did not appear forthcoming
through legislative action; a commonly held assumption is that lawsuits are
the only way to bring about change in the state. Another lawsuit, on which a
ruling is pending, addresses the legality of waiting lists for waiver services.
The lawsuits and the fiscal reality of limited resources to address significant
needs recently led to a series of recommendations from the state that stress flexibility for services through block grants to local jurisdictions, vouchers, and
greater use of managed care concepts. Efforts to follow through with some of
these recommendations are under way.
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49
Continuity and Change
in the State’s
Health Care Policy
for Low-Income Groups
C
olorado’s strong dependence on employer-based health insurance and
its lean Medicaid program has been a reasonable strategy in a strong
economy. The number of uninsured persons is quite low, as even small
employers have provided health insurance for their workers. The
insurance reforms that the state has adopted over the years seem to have
resulted in a stable market for such small employers. And the safety net of hospitals and clinics that care for the uninsured, particularly in Denver, has
remained relatively strong.
An important challenge for the future, however, is how well the state could
weather an economic downturn. High unemployment rates could push up the
number of uninsured substantially, and it is not clear that Medicaid could or
would fill in the gaps. Further, Colorado’s state-only programs that offer some
additional protections remain very limited and might also come under great
pressure during a recession in the region. This is likely the most important challenge that the state will face in the near future.
How might the state respond to slower economic growth and higher unemployment? Such a situation would mean lower state revenues. The traditional
response by many states in such times is to rein in payments under Medicaid or
make other adjustments to stretch resources when more people become eligi-
ble for assistance. But Colorado has little fat in its Medicaid program, and hence
it may be more difficult for the state to stretch its resources. Further, the revenue
and spending limits that are now part of the state’s constitution would restrict
any participation expansions in a short period of time.
Colorado is a high disproportionate share hospital state and hence might
be able to use new means to expand its federal contributions—a technique that
the state has recently rejected but might look upon more favorably during an
economic downturn. Federal legislation passed in 1997 to curb states’ use of
DSH payments would restrict this option somewhat, but Colorado is currently
well below its DSH limit.
Colorado’s implementation of SB 97-5, which sets a goal of moving more
Medicaid recipients into capitated managed care, may result in some additional
challenges as well. The legislation is expected to generate savings to the
Medicaid program that can be used to finance expansion of children’s health
insurance. But some interviewees were skeptical of how well the state could
accomplish the goals of the legislation. Moreover, if these managed care expansions move more recipients into commercial HMOs and away from Colorado
Access (which helps to finance many of the safety net providers), new pressures
on the safety net may emerge that will require some additional support to maintain the ability of the state’s health care system to take care of the uninsured.
Similarly, public health departments are struggling somewhat in an environment of increasing Medicaid managed care, shifting in some cases from providing direct services to meeting more traditional public health functions. It is
not known how well health departments can operate in this new environment
or how well local and state dollars will offset any losses in Medicaid revenues.
Finally, long-term care services may also be stretched in the future. The
influx of retirees into Colorado at present is likely attracting a healthier and
relatively well-off subgroup of elderly. But if these retirees remain as they age,
their needs for long-term care and other services may grow substantially. In that
case, Colorado may face some of the same pressures as states like Florida with
large elderly populations. The current long-term care system is likely inadequate to meet those needs over time.
52
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
Notes
1. Colorado Department of Public Health and Environment budget documents.
2. Division of Mental Health Services budget documents.
3. Community Centered Boards, Condensed Combined Statement of Support and Revenue,
year ended June 30, 1995.
4. Department of Health Care Policy and Financing, 1997 Reference Manual.
5. Department of Health Care Policy and Financing estimates as of August 1996.
6. Department of Health Care Policy and Financing, Colorado Indigent Care Program, FY
1996 Annual Report, revised April 1997.
7. Ralph Pollock, Rocky Mountain Health Care Observer, June 5, 1996.
8. Stephen Norton, “Medicaid Fees and the Medicare Fee Schedule: An Update,” Health
Care Financing Review (Fall 1995), vol. 17, pp. 167–181.
9. Colorado Department of Health Care Policy and Financing, 1997 Reference Manual.
10. Colorado Department of Health Care Policy and Financing, 1997 Reference Manual.
11. Laura Tollen and Michael Rothman, Colorado Medicaid HMO Risk Adjustment: A Case
Study, Conference Draft, January 29, 1998.
12. Bureau of National Affairs, Health Care Policy Report, June 2, 1997.
13. Department of Health Care Policy and Financing Annual Report 1996.
14. Colorado Department of Human Services and Colorado Department of Health Care Policy and
Financing, Colorado Mental Health Capitation Pilot Program: Final Report, January 1, 1997.
15. Colorado Mental Health Capitation Report.
16. Colorado Mental Health Capitation Report.
17. National Association of County and City Health Officials, unpublished data.
18. Ralph Pollock, Rocky Mountain Health Care Observer, 1996.
19. Colorado Hospital Association, Colorado Hospitals Reference Guide to Financial and
Utilization Data 1991 through 1995, July 1996.
20. 1997–98 Long Bill Narrative, Joint Budget Committee, March 1997.
21. American Association of Retired Persons, Across the States: Profiles of Long-Term Care
Systems, 1998. (This number represents a point-in-time census, January 24, 1996.)
22. Charlene Harrington et al., 1995 State Data Book on Long-Term Care Programs and Market
Characteristics, November 1996.
23. American Association of Retired Persons, Across the States: Profiles of Long-Term Care
Systems, 1996.
24. Department of Health Care Policy and Financing, 1997 Reference Manual.
25. Department of Health Care Policy and Financing, 1997 Reference Manual.
26. Lisa Alecxih et al., “Estimated Cost Savings from the Use of Home and Community-Based
Alternatives to Nursing Facility Care in Three States,” American Association of Retired
Persons, November 1996.
27. American Health Care Association, Facts and Trends: The Nursing Facility Sourcebook,
1997, Washington, DC, p. 59.
28. Alexis Senger, Memorandum to Joint Budget Committee Members, April 8, 1997.
29. Colorado Department of Human Services and Colorado Department of Health Care Policy and
Financing, Colorado Mental Health Capitation Pilot Program: Final Report, January 1, 1997.
30. Developmental Disabilities Services, Office of Health and Rehabilitation Services, Colorado
Department of Human Services, budget documents.
31. Robert Prouty and K. Charlie Lakin, Residential Services for Persons with Developmental
Disabilities: Status and Trends through 1995, Minneapolis, MN: University of Minnesota,
May 1996.
54
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
APPENDIX
List of People Interviewed
Department of Health Care Policy and Financing
Vickie Akers
Michelle Laisure
Richard Allen
Nancy Peters
Colleen Bryan
Michael Rothman
Bernie Buescher
Sarah Schulte
Marilyn Golden
Gary Snider
Greg Gruman
Margaret Traudt
Department of Human Services
Rita Barreras
Tom Barrett
Jay Kauffman
Geneva Lottie
Kerry Stern
Department of Public Health and Environment
Lynn Dierker
Lindy Nelson
Daniel Gossert
Merril Stern
Tom Hadden
Department of Regulatory Agencies
Barbara Yondorf
Division of Insurance
Office of the Governor
George Delaney
Carol Hedges
Carole Poole
Lisa Weil
Legislature
Senator Sally Hopper
Alexis Senger
Hospitals
Frank Barrett
Douglas Clinkscales
Patti Gabow, M.D.
Fred Morefield
Stephen Berman, M.D.
Dennis Brimhall
Denver Health and Hospital Authority
Denver Health and Hospital Authority
Denver Health and Hospital Authority
Denver Health and Hospital Authority
Children’s Hospital
University Hospital
Community Health Centers
Jerry Brasher
Joanne Lindsay
Peter Leibig
Salud Family Health Centers
Salud Family Health Centers
Clínica Campesina
Health Maintenance Organizations
Stephen O’Dell
Colorado HMO Association
David West
Colorado Access
Provider Associations
Ellen Caruso
Annette Kowal
Jennifer Laman
Suzanne Hamilton
Larry Wall
Experts and Advocates
Lena Archuleta
Alice Debner
Jane Rogers
Phoebe Barton
Buffy Boesen
Steffi Clothier
Virginia Fraser
Michael McArdle
Ralph Pollock
Barbara O’Brien
Mary Catherine Rabbitt
Julie Reisken
56
Colorado Association of Home Health
Agencies
Colorado Community Health Network
Colorado Community Health Network
Colorado Medical Society
Colorado Hospital Association
American Association of Retired Persons
American Association of Retired Persons
American Association of Retired Persons
University of Colorado Health Sciences Center
All Families Deserve a Chance (AFDC) Coalition
All Families Deserve a Chance (AFDC) Coalition
Legal Center for People with Disabilities and
Older People
Colorado Association of Commerce and Industry
Colorado Association of Commerce and Industry
Colorado Children’s Campaign
Legal Aid Society of Metropolitan Denver, Inc.
Colorado Cross-Disability Coalition
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
About the Authors
Marilyn Moon is a senior fellow with the Health Policy Center of the Urban
Institute. She serves as one of the two public trustees of the Social Security
and Medicare trust funds. Dr. Moon has written and spoken extensively on
health policy, policy for the elderly, entitlement issues, and income distribution. In addition, she has served as the founding director of the Public Policy
Institute of the American Association of Retired Persons.
Len Nichols is a principal research associate in the Urban Institute’s Health
Policy Center. His recent work includes health insurance reform, Medicare
reform, and medical savings accounts. Before he joined the Health Policy
Center, he was senior advisor for health policy at the Office of Management and
Budget and chair of the Economics Department at Wellesley College.
Stephen Norton is a research associate at the Urban Institute’s Health Policy
Center, where he specializes in research on the Medicaid program, maternal
and child health, and institutions providing care to the medically indigent. He
is the author of a number of articles on health care.
Barbara A. Ormond is a research associate in the Urban Institute’s Health
Policy Center. Her current research focuses on the effect of changes in the hospital sector on access to care by low-income populations. Her other research
includes an evaluation of managed care in Medicaid. Before she joined the
Urban Institute, she did research on health programs in Indonesia, Haiti, and
Cameroon.
Susan Wallin is a research associate in the Urban Institute’s Health Policy
Center. Previously she served as an analyst for the Physician Payment Review
Commission. Her research has centered on access to care for low-income populations, including issues of health professional maldistribution, Medicaid
managed care, and public health departments.
Jean Hanson served as a research associate in the Health Policy Center of the
Urban Institute. She worked on a number of long-term care issues, including
home health care expenditures under Medicare and Medicaid.
Laurie Pounder was a research assistant in the Urban Institute’s Health
Policy Center. Her focus was on Medicare policies, specifically program financing and out-of-pocket spending by beneficiaries.
58
HEALTH POLICY FOR LOW-INCOME PEOPLE IN COLORADO
Errata
Several published State Reports and Highlights include an error in Table 1, “State
Characteristics.” Incorrect figures were included for noncitizen immigrants as a
percentage of the population. Corrections were made on August 13, 1998 to both the
HTML and PDF version of these reports on the Assessing New Federalism website.
Correct figures for 1996
Noncitizens as a
Percent of the
Population
UNITED STATES
6.4%
Alabama
0.9%
California
18.8%
Colorado
5.1%
Florida
10.0%
Massachusetts
5.4%
Michigan
2.3%
Minnesota
3.0%
Mississippi
0.9%
New Jersey
8.8%
New York
11.9%
Oklahoma
1.5%
Texas
8.6%
Washington
4.3%
Wisconsin
2.1%
Source: Three-year average of the Current Population Survey (CPS) (March 1996-March 1998,
where 1996 is the center year) edited by the Urban Institute to correct misreporting of citizenship.
The error appears in the following publications:
State Reports:
Health Policy: Alabama, Colorado, Florida, Massachusetts, Michigan, Minnesota, Mississippi,
New Jersey, New York, Texas, Washington
Income Support and Social Services: Alabama, California, Massachusetts, Michigan, Minnesota,
Texas, Washington
Highlights:
Health Policy: Alabama, Florida, Massachusetts, Michigan, Minnesota, Mississippi, New
Jersey, New York, Oklahoma, Texas, Washington
Income Support and Social Services: Minnesota, Texas
The Urban
Institute
2100 M Street, N.W.
Washington, D.C. 20037
Phone: 202.833.7200
Fax: 202.429.0687
E-Mail: [email protected]
http://www.urban.org
State Reports
Nonprofit Org.
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Washington, D.C.